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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Farrer 36 Asset Management 2023 Q4 Investor Letter | Buyside Digest

Back to Fund Profile (Farrer 36 Asset Management)

Primary Source Intelligence • Q4 2023 Letter Analysis

Farrer 36 Asset Management Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Farrer 36 Asset Management. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

QTD+9.88%

Annualized-14.31%

Digest Analysis

Quick Take

"Farrer Wealth outperformed this quarter but remains significantly behind since inception. Portfolio trades at 50% of fair value with 98% upside potential."

Executive Summary

Farrer Wealth's Managed Solution returned 9.88% in Q2 FY2024, outperforming the 7.48% benchmark, though still significantly behind since inception with -41.62% versus 3.51% benchmark returns. The portfolio trades at approximately 50% of fair value with 98% projected upside remaining. Key catalysts materialized including eDreams strong cash flow guidance, Adyen's well-received investor day driving 65% stock appreciation, and Basic-Fit's competitive positioning. The manager sold the remaining Vizio position after a 64% rebound, citing business quality and management capital allocation mistakes. The portfolio skews toward small- and mid-caps which should benefit from expected central bank rate cuts in 2024, as these companies typically have more floating-rate debt and benefit from increased risk appetite. With several catalysts yet to be realized and favorable macro conditions ahead, the manager views this as an opportune time for capital deployment into the concentrated 12-20 position portfolio focused on businesses growing market share in expanding markets.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

72%

CautiousHigh

High Conviction (72%)

Manager demonstrates high conviction through concentrated 12-20 position portfolio with specific position sizing and catalyst discussions. Names individual holdings with detailed analysis and projects 98% upside with specific fair value assessments. However, significant past underperformance and mistake acknowledgment prevents maximum conviction score.

Growth Outlook

60%

BearishBullish

Neutral (60%)

Manager expresses constructive optimism about macro environment with central banks ending rate hikes and likely cutting rates in 2024, which should benefit the portfolio. Acknowledges favorable conditions ahead while maintaining realistic perspective on market dynamics.

Risk Appetite

40%

DefensiveAggressive

Defensive (40%)

Portfolio remains fully invested in 12-20 concentrated positions with no new additions this quarter. Manager sold Vizio position but maintains risk-on positioning in small- and mid-caps, showing moderate risk appetite despite past underperformance.

Capital Deployment

43%

De-riskingDeploying

Net Neutral (43%)

Manager sold remaining Vizio position during the quarter with no new additions, representing net capital reduction. However, this appears to be tactical position management rather than broad de-risking, as core portfolio remains intact and manager advocates for new capital deployment.

Forward Guidance

70%

CautiousExpansionary

Expansionary (70%)

Manager explicitly states this is an opportune moment to add capital and expresses confidence in multiple catalysts yet to be realized. Clear deployment bias with expectation that macro environment will benefit portfolio positioning.

Language Signal

50%

BearishBullish

Balanced (50%)

Balanced language mixing opportunity-focused terms like embedded value, upside, catalysts, and opportune moment with acknowledgment of past mistakes and underperformance. Net neutral directional language.

Perceived Risk

45%

Low RiskElevated

Moderate Risk (45%)

Manager acknowledges past mistakes and significant underperformance but frames current environment as favorable. Discusses three categories of investment mistakes and competitive industry risks, showing moderate risk awareness without systemic concerns.

Opportunity Density

65%

ScarceAbundant

Abundant (65%)

Manager sees selective opportunities with portfolio trading at 50% of fair value and multiple catalysts yet to be realized. Describes current moment as opportune for deployment, indicating good opportunity availability within their focused approach.

Time Horizon

75%

Short-TermLong-Term

Decade+ (75%)

Manager emphasizes long-term approach with focus on businesses growing market share over time. Discusses multi-quarter catalyst timelines and acknowledges that some catalysts need 1-2 quarters to show true potential, indicating patient capital approach with 2-5 year investment horizon.