On the plus side, the philosophy of the fund remains intact, according to Dorricott, and Davies seems willing to take some aggressive positions, which has done wonders for the fund in the past.
Still, because of the extent of the fund’s underperformance last year, Dorricott said the team’s “confidence in his ability to outperform over the medium term” has been reduced.
“Last year was a difficult year for many managers but with the Brexit vote there was a clear potential for things to go either one way or another.
“In the case of Davies’ fund, the diversification in the fund could have been a little better to alleviate some of that underperformance.”
In his last outlook – published in January – Davies admitted that “the first half of 2016 could not have been much worse for the fund.”
However, the fund’s performance over the second half was better, he argued, increasing by 16.9% after its 20% decline in H1 in absolute terms.
Despite this, he said there is “still plenty of ground to make up.”
“My investment process and the ability to think correctly under pressure helped the fund to deliver big bouncebacks in 2009 and 2012 following previous difficult patches and I remain very excited about the prospects for the portfolio over the next 2-3 years, albeit there will be volatility along the way and progress is unlikely to be linear.”
