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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Trojan Fund from Troy Asset Management 2023 Q3 Investor Letter | Buyside Digest

Back to Fund Profile (Trojan Fund from Troy Asset Management)

Primary Source Intelligence • Q3 2023 Letter Analysis

Trojan Fund from Troy Asset Management Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Trojan Fund from Troy Asset Management. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

Annualized+6.6%

Positioning StanceConstructive

GeographyUS, Global

Digest Analysis

Quick Take

"The Goldilocks era has ended as the Fed keeps rates elevated to combat inflation. Portfolio maintains 25% equities in quality names while adding inflation protection through index-linked bonds."

Executive Summary

Troy Multi-Asset Strategy delivered a 6.6% return year-to-date through September 2023, navigating a challenging environment marked by rising bond yields and shifting rate expectations. The manager believes the Goldilocks era of low rates and stable inflation has ended, with the Federal Reserve committed to keeping rates high until inflation sustainably declines. This structural shift requires repricing assets for a higher cost of capital. The portfolio maintains 25% equity exposure focused on quality companies like Unilever, Nestlé, and Microsoft, while significantly increasing index-linked bond holdings to protect against inflation. Key risks include widespread corporate financial distress, with 37% of US nonfinancial companies near default according to Federal Reserve data, and the historical pattern of recessions following rate hiking cycles. The manager expects earnings deterioration but remains optimistic about long-term opportunities in digitization, AI, and Asian consumer growth. The strategy emphasizes patience and selectivity, positioning for a world where both growth and inflation run higher than the previous decade.

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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

68%

CautiousHigh

Moderate (68%)

The manager demonstrates moderate-high conviction through concentrated equity holdings with 8 named positions comprising 22% of the portfolio, clear thesis on structural inflation and rate changes, and decisive action in adding index-linked bonds. However, the 25% equity allocation and defensive positioning prevent a higher score.

Growth Outlook

38%

BearishBullish

Neutral (38%)

The manager expresses cautious pessimism about markets, describing the end of the Goldilocks era and emergence of a more bearish reality. They view recent equity weakness as more rational than earlier ebullience, suggesting markets were previously overvalued.

Risk Appetite

45%

DefensiveAggressive

Balanced (45%)

Portfolio maintains defensive positioning with only 25% equity exposure and significant allocation to inflation-protected bonds. The manager has added to index-linked holdings as a defensive measure against inflation risks.

Capital Deployment

15%

De-riskingDeploying

De-risking (15%)

Limited deployment activity with the main action being adding to index-linked bond holdings in August. The manager maintains only 25% equity exposure and explicitly states they expect better buying opportunities when valuations fall alongside earnings deterioration.

Forward Guidance

43%

CautiousExpansionary

Neutral (43%)

The manager expects to buy at lower valuations that will coincide with earnings deterioration, suggesting they are waiting for better entry points rather than aggressively deploying capital at current levels.

Language Signal

35%

BearishBullish

Bearish (35%)

Language is dominated by risk-focused terms including financial distress, recession risks, corporate defaults, and the end of favorable market conditions. Bearish language significantly outweighs bullish references.

Perceived Risk

75%

Low RiskElevated

Elevated Risk (75%)

High perceived risk with detailed discussion of corporate financial distress affecting 37% of US companies, historical recession patterns following rate hikes, regional bank stress, and the structural end of the low-rate environment. Multiple systemic risks are identified and analyzed.

Opportunity Density

45%

ScarceAbundant

Selective (45%)

Mixed opportunity assessment - the manager sees limited near-term opportunities at current valuations but maintains confidence in longer-term themes like digitization, AI, and Asian consumer growth. They expect better opportunities to emerge when valuations decline.

Time Horizon

72%

Short-TermLong-Term

Decade+ (72%)

Multi-year investment horizon with focus on longer-run durability of business models and structural themes like digitization and Asian wealth growth. The manager explicitly discusses building understanding of exceptional businesses for the long term and expects structural changes to play out over years.