FUNDS
Virtual FUND 2023/24
This year we are launching the Virtual Fund Challenge in a new format to make it a more interesting and insightful experience for members. We are changing the format to make everyone involved in the challenge, so that LUUTIS members can gain more practical and soft skills from it, but also to make it a more enjoyable and rewarding experience.
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Structure:
This new format will ideally consist of 5-6 teams, each comprising of 1 Portfolio Manager and around 8 Analysts. These figures are subject to change according to interest in the challenge. The Virtual Fund Challenge will be overseen by 2 Fund Managers.
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Organisation & Responsibilities:
Everyone participating in the challenge will be invited to an induction video call as well as monthly calls hosted by the Fund Managers to clarify the performance of other teams and answer any questions that anyone may have.
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The responsibility of Analysts is moving to a more structured approach, while maintaining the freedoms that were introduced in the previous iteration of the Virtual Fund Challenge. This involves supplying analysts with a template for a brief stock pitch, which includes what information to gather and some suggestions on where to find this information. Examples of completed templates will also be included for reference. The aim of this is to make meetings more structured and accessible to those that are unsure of where to start. It is not required that analysts use these templates, but for the sake of consistency and simplicity it is recommended.
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Analysts will research any non-levered security of their choice, allowing them to experience working with any financial market they wish. They will then use this research to produce a pitch using either the provided template or their own structure. This pitch is to be presented at the Analyst’s team meeting, where they will communicate to their team the reasons to invest in that security.
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Portfolio managers will oversee organising and leading the weekly 1-hour in-person meetings with their team, as well as executing trades on the securities that are pitched in these meetings, should they be selected for investment. Optionally, Portfolio Managers are welcome to take on the responsibilities of Analysts alongside the duties of their role as Portfolio Manager.
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Meeting format:
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The meetings should involve at least 1 pitch from each Analyst, although it is recognised that this is not always possible – attendance is the priority, whether they bring a pitch with them or not they will still gain relevant skills through being involved in the team decision-making process. All Analysts who have produced a pitch should send their pitch to their team’s WhatsApp group so that anyone not in attendance still has the option to communicate their pitch and vote on their team’s pitches.
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The decision to invest a portion of your team’s capital into the securities from the pitches is to be voted on at the end of each pitch by all members of the team, with all team members (including Analysts and Portfolio Managers) having equal voting rights. This vote should ideally be held using a poll on the team’s WhatsApp group, for the purpose of simplicity. Any pitch that receives votes from the majority of team members is to be traded by the Portfolio Manager.
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Virtual Fund 2023/24 Winning Team
Portfolio Manager: Ben Ruth
Analysts: Will Turrell, Zachary Gold, Aishath Ushna Iyaz, Marwan Elkholy, Alexander Tarnavchik, Srinandni Verma, Freddie de Monte and Marwan Abdalla
Fund Managers: Dominic Wilton and Aum Raithatha
LUUTIS Committee congratulates Ben Ruth and his team for winning the 2023/24 LUUTIS Virtual Fund Challenge!
They achieved a return of 18% over the 20-week period, investing in a total of 33 securities. Compared to the S&P500’s 20.3% return, they outperformed many professional active fund managers – without leverage!
Their well-deserved prize is a £200 dinner for the team.
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More information regarding the team's investment approach and strategy is provided below***
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Strategy
Our investment strategy was underpinned by macroeconomic analysis. Through November and December, we focused particularly on the substantial effects of interest and inflation rates on markets.
After assessing macroeconomic factors, our approach involved fundamental analysis. We invested in fundamentally strong companies with positive short-term outlooks, observing both qualitative (e.g. management and industry factors) and quantitative analysis (e.g. financial and market strength) of companies, compared with others in their respective sectors.
Due to the limited timeframe of the challenge, I conducted technical analysis following the decision to place a trade to assess if it was the right time to enter a trade. I conducted the same analysis for existing positions to assess if it was the right time to exit a trade.
US
Throughout the challenge, we backed the recovery of the US economy, thus allocating more weighting to US stocks. Our analysis found that US Core CPI was upwardly skewed by shelter inflation, which is a lagging indicator, therefore by adjusting to eliminate this factor we found that inflation was within the target range. We exploited the positive impact this had by betting on stocks unrelated to this indicator, achieving outperformance of the S&P500 with our positions in Nvidia and Walmart.
UK and Europe
Factors such as energy inflation, the cost of living crisis and geopolitical tensions, meant we were wary of UK and European stocks. For this reason, we exclusively used a value investing strategy to evaluate companies with their main operations in these markets, with an emphasis on the strength of qualitative fundamental factors. Our most notable positions in these markets were Rolls Royce in the UK and Stellantis in Europe.
Japan
We also profited from a couple of long positions on Japanese companies. It is important to note that our trades in Japanese stocks involved greater scrutiny than others due to the sensitivity caused by uncertainty around the continuation of the Bank of Japan’s negative interest rate experiment.
Our most notable investment was in MUFG, which we chose due to the benefit to banks caused by increasing demand for household funds enabling more capital inflow to Japanese stocks from retail investors.
China
We chose to not invest in China due to the weakness of their economy over the 20-week period relative to other markets, as well as high geopolitical tensions.
Cryptocurrencies
We managed to generate a respectable return from BTC due to its significant price rise, despite the €50k limit
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Capital Allocation
On average, in a full portfolio of €1,000,000, we held around 10 positions at any one time, allocation varying levels of capital to each security based on the team’s confidence.
In total, we placed trades in 32 different securities, excluding cryptocurrencies. It took about a month since the first meeting to fill the portfolio.
Risk Management
We utilised technical analysis to decide on stop loss adjustments to lock in profits due to the high volatility of markets in the current environment. This was particularly important throughout the year, since although we occasionally missed even greater returns if we had held (as in the case of Nvidia), we realised the gains we had made and were able to utilise this capital in different investments.
We continued this strategy throughout the year with since it provided risk management benefits while accounting for the short investment time-horizon we had. This strategy bolstered our available capital over time, which meant we did not hold less-rewarding positions and positions that we had already seen sufficient profits from for too long.
Portfolio Manager’s Comments
Our success would not have been possible without fantastic effort from all my team’s analysts. Strong morale was created within the group, as positively performing stocks were discussed and celebrated in our group chat, and I reinforced this at meetings by keeping my group updated on the performance of our portfolio.
I saw significant improvement in knowledge and quality of pitches from the analysts throughout the year. Regular updates allowed them to learn from experience and the discussion of market trends in the meetings giving them a greater understanding of stock markets and securities.
Initially, I attempted to strengthen their knowledge with the help of an example of a complete 18-page stock pitch (not made by me!) and links to daily market roundups and suggestions on where they could read and research their pitches, such as the Bloomberg Terminal, FT and S&P Capital IQ.
Our success criteria: Remain an active member of the group, attend at least half of the meetings, contribute pitches across the duration of the challenge and vote on stocks to trade even if not attending the meeting.
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*** The provided references is for information purposes only. It is not intended to be investment advice. Seek information from a licensed professional for investment advice.
Virtual FUND 2020/21
This year we will be running the virtual fund competition in a brand-new format for our members.
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​Last year, the competition comprised of one fund with four sectors beneath it. The fund was run by one Fund Manager and two Sector Heads leading each sector together with a team of analysts. The aim was to see which sector could generate maximum returns from investing and trading on markets.
Following feedback received on last year's competition, we came to the conclusion that the stock-picking in one specific sector does not provide our members with an adequate introduction to investing and the financial market. Therefore, this year the sectors will be removed and will be replaced by portfolios. The aim of the fund (portfolio) based approach is to enable our members to become exposed to the entire financial market and face the challenge of balancing risk versus reward, forcing them to take a longer-term market view.
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There will be a Fund Manager responsible for the fund meetings. The Fund Manager will also invest in the market himself/herself to be able to talk the fund through his/her thinking process. We aim to have 4 portfolios led by two Portfolio Managers responsible for running the portfolio. Some analysts in every fund will have an opportunity to be promoted to Senior Analysts.
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After the Fund Manager pitches the market outlook, the fund will proceed to asset allocation and constructing the portfolio, deciding on the ratio of stocks versus bonds and keeping in consideration the currency risk. Finally, the analysts will be responsible for deciding the stock sectors and bond types they want to invest in.
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Although the structure of the Virtual Fund has been adjusted, the ways in which we conduct meetings will be much the same. The meetings will continue to be both instructional and practical so that everyone can develop their trading skills. We shall begin with the very basics in trading, allowing people of all abilities to participate. We want to make the fund as accessible as possible.
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We use Exante as our platform for placing trades. Exante allows us to capture an incredibly broad range of investments and having used it in the past, is something we are very familiar with! This allows members interested in becoming analysts to research an area they find interesting, one which they may also choose to pursue for their future careers.
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If you are interested in taking further steps towards a career in finance, we strongly recommend that you become and an active member of the Fund.
VALUE FUND 2019/20
Welcome to the Global Value Equity Fund!
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We are a group of value investors who rely primarily on fundamental analysis to calculate aspects of equities such as intrinsic enterprise value. Our fund philosophy is principally concerned with the safe return of capital and thereafter an adequate return on invested funds. We buy at significant margins of safety and only sell if prices become grossly overvalued by our analysis metrics.
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We are contrarian investors at heart who do not believe in efficient market theory over long term horizons. Since our virtual fund runs over the course of an academic year, we seek shorter-term returns by buying severely mispriced stocks, particularly when mispriced by transient market sentiment since sentimentally, rather than fundamentally, priced stocks tend to revert to the long-term average intrinsic value over relatively short-term horizons.
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We are chiefly interested in five key market sectors, namely:
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Consumer discretionary and staples
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Financials
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Technology, Media and Telecommunications (TMT)
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Foreign Exchange (Forex)
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We look forward to operating in a rather unprecedented generally overpriced era with very low interest rates and high levels of QE persisting globally. Identifying value can therefore be challenging but we are up to the task!
VALUE FUND 2018/19
Welcome to the Global Value Equity Fund!
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We are a group of value investors who rely primarily on fundamental analysis to calculate aspects of equities such as intrinsic enterprise value. Our fund philosophy is principally concerned with the safe return of capital and thereafter an adequate return on invested funds. We buy at significant margins of safety and only sell if prices become grossly overvalued by our analysis metrics.
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We are contrarian investors at heart who do not believe in efficient market theory over long term horizons. Since our virtual fund runs over the course of an academic year, we seek shorter-term returns by buying severely mispriced stocks, particularly when mispriced by transient market sentiment since sentimentally, rather than fundamentally, priced stocks tend to revert to the long-term average intrinsic value over relatively short-term horizons.
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We are chiefly interested in five key market sectors, namely:
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Consumer discretionary and staples
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Financials
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Technology, Media and Telecommunications (TMT)
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Foreign Exchange (Forex)
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Commodities
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We look forward to operating in a rather unprecedented generally overpriced era with very low interest rates and high levels of QE persisting globally. Identifying value can therefore be challenging but we are up to the task!
MACRO FUND 2017/18
The LUUTIS Macro Fund is a multi-sector and multiple asset-class investment fund, focusing on employing ‘Macro Strategies’ to realise relative and absolute returns.
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Specifically, the Macro Fund seeks to compose a portfolio of equity-based and currency-based assets which complement and capitalise on the predictions made by the Fund’s Analysts and Sector Heads. Investment opportunities may arise from a plethora of global, continental, national or regional news, events and trends. The predictions which Fund Members make in relation to these opportunities will develop into the overall rationale behind going Long or Short position on a particular asset.
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Given the nature of the opportunities which fall into the Macro Investment Strategy, the Macro Fund is able to engage in more far-reaching, fast-paced investment opportunities. This contributes to an exciting and persistently evolving investment approach, with a variety of different approaches to capitalising on specific Macro predictions.
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In terms of structure, the Fund is comprised of three sectors; Foreign Exchange, Emerging Markets and Macro Equities (Developed Markets). These sectors are, in turn, lead by an experienced team of Sector Heads who coordinate investment opportunities among sector sub-teams. While investment will predominantly come in the form of a Long or Short position in either an equity (stock) or currency, the nature of the investment strategy lends itself to the use or more complex equity/foreign exchange based derivatives and, in some cases, fixed income products.
Equity FUND 2016/17
We are managing a primarily long value equity fund with a maximum short position of 30% of the portfolio. We do not believe the market is strong or semi-strong efficient in the short-run, however, we do believe that prices and intrinsic values of assets converge in the long run. As a result, our aim is to exploit this short-term inefficiency by buying/shorting under-/over- valued assets and holding them until they, in our opinion, reach their appropriate price.
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Our investing process is principally bottom-up as we believe it is easier to gain a knowledge advantage on individual companies than on whole markets or economies. Hence, we aim to know-the-knowable better than our peers and intend to achieve superior investment results based on our proprietary company specific research.
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Furthermore, we believe too much diversification can diversify away our returns and hence are proud active investors in a small portfolio of assets that we are confident in.
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At this moment in time our fund is split into three areas:
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Technology
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Energy and Healthcare
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Financial Institutions and Consumer Services