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Latitude invests in stocks for long-term growth but balances this with lower-risk non-equity investments
Thursday 14 Oct 2021 Author: Tom Sieber

We could be about to enter a trickier period for stock markets as risks around slowing economic growth and rising prices mount.

A fund which maintains exposure to shares with long-term growth potential and with exposure to more defensive bonds looks like a good option. Latitude Horizon (BG1TMR8) fits the bill and has demonstrated a decent level of performance, achieving a three-year annualised return of 8.1%.

It has an ongoing charge of 1.28% which is higher than a typical global or UK equity fund, reflecting the fact that it is doing a lot more than just picking stocks.

The £234.5 million fund is steered by Freddie Lait, who set up Latitude Investment Management in 2016 having previously established a track record at hedge fund Odey Asset Management.

The strategy is refreshingly straightforward. Around half the portfolio is held in a concentrated list of stocks with annual turnover in the portfolio of around 10%.

The aim with the equity part of the fund is to achieve strong returns through different economic and market cycles by buying quality businesses and diversifying across different sectors and countries.

The fund targets firms which can deliver between 10% and 12% growth in intrinsic value, measured by cash flow, net asset value and earnings.

The top holding is currently Autozone, a US firm which sells car parts and accessories. Other names in the portfolio include soft drinks giant Coca-Cola, Facebook and Google-owner Alphabet.

The remaining part of the portfolio is invested in government bonds, inflation-linked bonds, currencies and commodities like gold to offset some of the risk of volatility in the stock market.

This is intended to limit exposure to any market corrections, with the fund potentially pulling back by a little less than half the downwards move in the wider market.

Around 30% is invested in inflation-linked bonds, which should help shield the portfolio from rising prices.

In its most recent monthly commentary, the fund noted: ‘We continue to believe that the optimal defence against inflation is a well-diversified, reasonably priced portfolio of large-cap stocks, which offer strong prospects for growth.

‘Including many companies with pricing power, and those which benefit from rising rates and inflation further lowers the risk.

‘Short-dated inflation-linked bonds are still under-pricing inflation risk and are a more attractive option at this point to alternative solutions, or even gold. This has been our core asset allocation within the fund for the past couple of years, weathering numerous market environments well. We remain committed to it.’

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