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Theron de Ris B. G., Opalesque Geneva: A long-biased long/short equity strategy deploying long-term capital into small and mid-cap ideas in out-of-favour segments of the market returned 18% last year - after returning almost 50% in 2020.
London-based Eschler Asset Management LLP is an independent investment practice modelled on the original Buffett Partnership. The managers, who invest heavily in the Partnership, look for resilient businesses in capital-constrained markets.
"We try to position ourselves in the parts of the market that are likely to expect higher future returns, and where there is a lot less interest," portfolio manager Theron de Ris tells Opalesque. "That has kept us away from Tech. Over the past six months, it has helped us quite a bit.
"There are areas of the market that are still quite out of favour and where the market is not positioned for a bull market. Energy for example is still only 3% of the S&P500 and has been a rich source of returns.
"We have moved into several names in the UK, a somewhat defensive market, where there are interesting growth names that we can purchase at much larger discounts to comparable companies in the US markets."
The managers have also dabbled in shorts over the past six to nine months for the first time in a while. That has helped quite a bit, he adds, though they could have done even better. "We have realised profit on much of our short positioning and we are looking for re-entry points. For now, we are mostly long and relying on precious metals holdings to diversify the portfolio."
The Partnership
Eschler's founder Theron de Ris gained experience as a senior analyst at Indus Capital Partners. Prior to Indus, he spent 13 years in equities at Goldman Sachs and Morgan Stanley in Frankfurt, Milan, and London.
Eschler Partnership's B USD share class net asset value per share rose 18.2% in 2021 compared to the Credit Suisse Long/Short Index TR's 8.4% return, capping a 15% annualised five-year result since de Ris resolved to make Eschler his full-time focus.
From inception in October 2012 to the end of 2021, the Partnership's annualised growth in NAV per share of 11.7% exceeded long/short equity indices by 5-8% per year.
As of mid-February 2022, the Partnership's AuM is about $20m and the YTD return is up high single digits net of fees.
The managers invest in well-financed businesses with attractive normalised returns on
capital run by owners/operators. The strategy combines market cycle and industry
analysis with bottom-up stock picking.
At the end of 2021, the Partnership was invested in precious metals (35%), oil and gas (13%), uranium (9%), consumer discretionary (8%), and EU banks, industrials and others (27%).
Precious metal (gold, silver, platinum, palladium) prices trended lower in the second half of 2021, reflecting declining investor sentiment and soft physical demand, according to the World Bank. Gold prices have been relatively more resilient but were weighed down by outflows from gold-backed ETFs and slowing central bank purchases. Silver prices slumped on waning industrial demand, while platinum and palladium prices plunged due to weak autocatalyst demand. Precious metal prices are anticipated to ease in 2022, but there is high uncertainty arising from the Omicron variant and monetary policy stances.
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