SORBUS VECTOR: Manager commentary May 2023

May 19, 2023

April 20th 2023, marked the 7th Anniversary since the launch of the SORBUS VECTOR fund.

To the end of April 2023, the fund has returned 108.1% (an annualised return of 11.0%) with a volatility of 11.8%.

Over the past six months to the end of March the VECTOR fund has gained 7.07%. This is behind our MSCI UK benchmark of 12.09%.* 

However, we would just add that so far in May the fund has clawed back 2.1% of this underperformance as we have gained 0.6% whilst the market has fallen 1.5%** (as at 10/05/23).

This again demonstrates that we tend to preserve our shareholders wealth much better than many during difficult periods.

Indeed at the time of writing (10/05/23) we are now ranked 2nd out of 248 funds in our sector (IA UK All Companies) and virtually all other UK equity funds including Equity Income and Smaller companies funds over the past three months. ***

“The first quarter of this year has been characterized by global markets, particularly the US, rebounding from their severe losses of 2022. Those that fared worst such as highly indebted recovery type stocks and particularly technology companies (in 2022, the NASDAQ 100 Tech Sector Index was down -39.5% *****) have been the main beneficiaries of this rebound.

The fund has very limited exposure to such businesses. Therefore it is inevitable that we did not fully participate in this rally, with our large cap stocks making gains but behind those of our benchmark. In addition our much higher than average cash weighting has been a drag on performance.

However, one swallow doth not a summer make as the saying goes. We have no fundamental opposition to investing in technology stocks, but our experience tells us that valuations still remain too high and history shows that in a proper new bull market it is very rarely the previous leaders that head the next charge.

We remain heavily invested in stocks that we believe are relatively predictable and hence lower risk compared to other equities. Stocks that can produce returns for shareholders like ourselves regardless of economic conditions and indeed particularly in tougher times, when such stocks often rise whilst others are falling as other investors realise the merits of such businesses.

We still believe such tougher times are likely in the near term. With our portfolio and cash weighting, we are ready to take advantage of any weakness, as we believe that our fund will prosper as it has done over the medium to long term.

Finally, there have been very few changes within the fund. We exited a very small holding of Revolution Bars, given the company has gone into a significant debt position again following an acquisition. We also added two new holdings: Nestle and the Lindsell Train Investment Trust.

Nestle was purchased given its excellent strategic positioning in emerging markets, a long track record of growth and defensive qualities (industry rules allow us to have up to 20% in overseas listed stocks). In addition we have initiated a smaller position in Lindsell Train Investment Trust. We have long admired their investment philosophy and had the chance to buy the shares at a small discount to NAV, whereas historically it has tended to trade at a very significant premium.” 


* Source: SORBUS PARTNERS LLP, Bloomberg as at 30/04/23
** Source: SORBUS PARTNERS LLP, Bloomberg as at 10/05/23
*** Source: SORBUS PARTNERS LLP, Trustnet website/FE Retail Platform (09/05/2018-09/05/2023) 
**** Source SORBUS PARTNERS LLP, Bloomberg as at 10/05/23