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We have changed our mind and cut exposure – an update on the global portfolios


We have changed our mind and cut exposure – an update on the global portfolios

In this week’s video insight, Andrew Macken reviews the recent changes to our global portfolios. Our concerns surrounding how COVID-19 will impact the US in particular have significantly grown from what they once were. This translates into a much more significant – and relatively longer lasting – downside risk in US aggregate demand than we had previously assessed. Though we certainly hope we are wrong, we now believe we were overestimating the preparedness of many western governments and are therefore facing the possibility of a crisis-in-confidence in these governments.

“Humans tends to be averse to change. It can be surprising, unsettling – even scary.  While I realise we may attract criticism for changing our thinking and our positions, we have done so on the basis that we believe it is the right thing to do for the people who have entrusted their capital to us.” Andrew Macken


Andrew Macken is the Chief Investment Officer of the Montaka funds and the Montgomery Global funds. He established MGIM in 2015 in partnership with Montgomery.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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  1. Hi Andrew,

    I have never posted on your site before, I have invested with you since inception and have often recommended you guys to friends in the past but I am now at the crossroads.

    Has the decision to “change your mind” and sell businesses at very low prices increased the risk of a permanent capital loss and under-performance?

    I thought we were investing in VALUE-ABLE high quality businesses at attractive prices that would outperform over the long term? Should we would be buying more of these great businesses while they were on sale?

    I sincerely hope the high level of Fund cash is being deployed to our advantage.

    All the best.

  2. Has Montaka/MOGL crystalized a large loss and now missed a 25% bounce in the US
    How much more has the fund lost with its large short over the S&P500 or has that been unwound and at what cost ?
    The reason I bought into the fund at launch is it was advertised as having the potential to out performance in volatile markets with protection from the down side with the shorts.
    Sadly it has never really outperformed in either market
    Markets are forward looking if you wait for a flattening of the curve and potentially new drugs to treat you might end up buying into a near term top


  3. Thank you for your honest assessment, active decision making and maximising into cash in accord with PDS

  4. The day of the fire sale to increase cash position was the day i partially withdraw to preserve capital. dow slightly up 2% up yet i lose 10%. awesome timing

  5. Congratulations on your honesty. It’s a point of differentiation from your peers that will stand you in good stead. FWIW I agree with your decision and your reasoning. When taxi drivers talk about buying the dip you know we aren’t there unfortunately.

  6. Thank you for this analysis. Very helpful and reassuring. Your comments about the USA were interesting.

  7. Thanks for this video. it clarifies a lot. I have to say I was astonished in the Feb monthly report to see the portfolio had been ratcheted up to 70% long just before the big part of the crash in march. It would be great to know how much damage was done before you reduced exposure though.

    • Peter,
      Thanks for the comment. Yes, our 70% net end of Feb was on the basis of: (1) improving virus data out of China and Korea – which we incorrectly used to update our assessment of the risks to the western world; combined with (2) the collapse in global interest rates; and (3) the prospect of future monetary and fiscal stimulus measures.
      With the benefit of hindsight, the positioning in February was clearly wrong.
      At the end of the first week of March this was reduced to approximately 60% net.
      The following week, the significant downside potential of this pandemic, in the US in particular, and the resulting impact to the global economy became clear to us – as well as the increased likelihood due to the under-testing that appeared to be taking place. So we made the most drastic cut in our exposure we have ever made, to 20%.
      I fully accept that a better time to make such a cut was one month earlier.
      I hope this is helpful additional information.
      All the best,

      • Thanks for the reply. Much appreciated. I don’t want to speak for the other investors but I should let you know I picked this fund mostly for the downside protection and less so the added alpha. But I understand everything is easier in hindsight !! FWIW you’ve cleared up all my misgivings with this post and i am impressed with the speed in which you moved when you changed your mind.

      • Thanks for the feedback, Peter.
        We will also host a webinar next week to answer any other questions on any topic from investors like yourself. So please feel free to ask us anything else that you can think of or send through any additional comments or feedback.
        All the best in this challenging time,

  8. Hi Andrew
    You made no mention of the short fund you had in place
    how has this faired with falling prices of equities?

    • Hi Scott,
      Our Montaka variable net strategy is the one that employs a short portfolio to help protect against stock market downturns.
      Our shorts have been generating significant gains and have been invaluable in the current environment.
      The very recent performance of this strategy has been below expectations: this weakness was entirely driven by poor performance in our long portfolio.
      Here are two reasons to be relatively more optimistic over the future returns of this strategy:
      (1) On March 16 we drastically cut the size of our long portfolio and increased the size of our short portfolio – to approximately 80% long and 60% short (resulting in a 20% net market exposure, the lowest in our history). We believe this configuration will greatly assist in preserving capital in a scenario in which we see further equity market declines in the short term; and
      (2) The investment opportunities that will arise from this pandemic crisis will likely be the greatest in a lifetime. As we navigate the human tragedy of this crisis, we are also fully prepared to swiftly capitalise on these opportunities when the time is right.
      I hope these comments are helpful.
      All the best,

  9. Thanks for the update Andrew. We are trusting in your expertise and welcome constant updates and transparency. Dave

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