Few redemptions and having cash enabled taking advantage of opportunities in 2009

by Ashik Shah on 31 January 2010

Kurm Investments, Inc. significantly outperformed the US markets in the quarter ended 31st January 2010.  Such short-term performance is certainly pleasing but should not be the focus of attention.  What is more important is that Kurm has outperformed the US indices over the long term.  This is how Kurm Investments has been able to preserve and grow capital over the last twelve years.

Kurm suffered from very few redemptions during the depths of the crisis and the investor base remained firm and committed, which is commendable.  Early 2009 offered some truly rare opportunities and Kurm was able to take advantage of them, having cash as the crisis began and becoming fully invested toward the end of the first calendar quarter.  Today, the financial services sector, which the fund has avoided for many years, is offering some clarity and Kurm has taken advantage of some of the opportunities in this sector.  Watch this space.

The last quarter has given the world a very mixed set of experiences.  We have seen crisis in the Middle East, the result of building castles on sand in Dubai.  Greece and other profligate European governments are now facing challenges to their creditworthiness, even putting the Euro under pressure and casting light on underlying structural differences in the common currency area.  There are still signs of indebtedness, financial weakness and undisclosed problems in several assets classes.  Many banks are still reluctant to bravely take full provisions until they repair their balance sheets.

At the same time, we have seen stock markets reach new short-term highs.  This is driven by liquidity and stimulus measures.  However, there really do appear to be genuine signs of recovery in certain western economies.  Asian economies seem to be progressing very well and their banks and governments are in a much better financial state.  Inflationary pressures are arising due to monetisation and quantitative easing.  Central banks are genuinely debating whether to raise rates to stem these pressures but are mindful of the risks to fragile economies.

As we look forward, there is much debate about which sectors and which regions, and even which assets classes, will provide the returns investors need.   Kurm has recently added slightly to its Asian exposure, and also to its private equity investments.  Distressed assets such as bonds, bankruptcy situation, and, on the rare occasion, property could provide long term value.

However, over the years, it has become clear that most value is created in businesses.  Kurm’s emphasis will remain concentration on businesses with good long-term economics run by people whose interests are aligned with shareholders.  Whether in Asia, or any other region, the return always and everywhere depends on buying at the right price.  Doing so with a margin of safety will mitigate risk and enable the capital of families or institutions with a long term horizon to grow.

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The views expressed and comments made on this website are not personal advice based on your circumstances. The purpose of this website is to provide information and analysis to help you make your own informed investment decisions. If you are not confident making your own investment decisions you should contact a firm which is authorised and regulated by the Financial Conduct Authority (such as Ashik Shah & Co. Ltd.) so that a qualified financial adviser, after considering your personal circumstances and investment objectives, can make personal recommendations of investments which are suitable for you. Whether you make your own investment decisions or prefer to follow the recommendations of a financial adviser you should always remember that your capital will be at risk and that investments can go down in value as well as up.

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