The Fund ended the month strongly up and gained over 4%, it performed exactly in line with its benchmark, the MSCI World Value Total Return Net Index. Year-to-date the Fund is up almost 10% but lags its benchmark.

The market got a boost in June after the US Federal Reserve indicated an interest rate cut in the near future. Every single sector ended the month in the plus, with materials and information technology being the strongest.

Strong performers this month were AerCap Holdings, Ferrexpo and Hennes & Maurits. Aercap is the world’s largest aircraft leading firm. It announced a new USD 200 million share buyback program. Iron ore producer Ferrexpo published an upbeat trading update mentioned that its H1 ebitda will increase materially year-on-year. In addition, the iron ore price reached a five-year high during the month. Swedish apparel retailer Hennes & Maurits showed progress in its turnaround and it indicated a strong start of their fiscal third quarter (June sales up around 12%). Until recently the market was worried about the high inventories of the company, but also here improvements are visible.

Weaker performers in June were Antero Resources, Leopalace21 and Hachijuni Bank. There was no specific news about E&P company Antero, but the natural gas price in the U.S. continues to be under pressure. Although the company has hedge part of its output at higher prices and has significant exposure to Natural Gas Liquids, the weaker gas price had an impact on the share price. Japanese Leopalace21 constructs and leases apartments and has issues with a range of its apartments which will create additional costs to fix the issues and reduce occupancy rates in meantime. It results in a volatile share price performance (last month the shares were up almost 70%). Japanese regional bank Hachijuni Bank fell a bit in June without company specific news.

In May we implemented some trades in the Fund, this month we made no portfolio changes.

The investment objective of the Fund is to invest in a portfolio of listed companies worldwide that trade at a discount to their intrinsic value. When investing, the focus will be on strong valuation discipline, cash generation and rational capital allocation. We conservatively estimate the fundamental value of a business and buy with a sufficient discount to create a margin of safety for potential mistakes. The Fund combines a business owner’s mindset with a rational investment process. Historically, value has outperformed growth over the long-term, but value has underperformed growth for an unprecedented period by now. As we believe in reversion to the mean, value investing could offer an attractive investment opportunity going forward.

We believe overall global stock market valuations are elevated, although Emerging and European markets still offers some pockets of attractively valued opportunities. The North American market is quite expensive. A firm may appear attractive based on its price to earnings ratio or other headline multiple, but if margins and/or revenue are high, this only gives you limited information about the future returns of an investment. In our investment process, we spent a large portion of our time understanding where profitability should be on an over the cycle basis, as this is what determines the cash flows we will receive as a long-term shareholder.

Our focus is on finding companies that can be bought at a discount to our estimate of intrinsic value. We base our estimate on the Earnings Power Value (EPV) framework of the Columbia Business School. EPV allows us to separate the three valuation components: asset value, earnings power and growth value. This framework improves our ability to analyze what we are paying for and gives insight into whether a stock is priced with a margin of safety. In addition, ESG (Environmental, Social and Governance) is fully incorporated in our investment process.