Update TCM corona pandemic
We would like to provide an update on how the TCM Investment Funds team manages the funds during this time of high volatility and uncertainty regarding the COVID-19 pandemic.
In times of crisis markets make no distinction. Both prices of solid and weaker companies are all under pressure. Companies that are most resistant to a long-term income shock are typically companies with low-debt and which have historically high returns on equity. The latter is often a sign of good management and/or high entry barriers that allows the company to maintain a solid market share. Companies with low debts and a dividend (growth) history, showing commitment to their dividend policy, are more likely to stick to their pay-out ratio. It are those ingredients that underpin the dividend strategy of our portfolios.
As such, we are using the current turmoil to further improve the portfolio, either by expanding existing positions or ultimately getting an entry point into new stocks that we had previously been waiting for. We maintain our focus on the long-term potential of our investments.
For investors it is good to know that the liquidity of the portfolios is monitored constantly. The latest analysis by the Risk Committee (March 2020) shows that all portfolios offer good liquidity in the current stress scenarios. Since the outbreak of the corona virus in the Netherlands on February 27, 2020, we have seen only a very slight outflow (0.5% of the number of outstanding shares) in the TCM Global Frontier HD fund. The TCM Global Emerging HD fund on the other hand had an inflow of more than 6%. The average cash percentage in the portfolios is currently 2.7%.
In the coming weeks headlines will undoubtedly remain filled with corona news and negative effects on the global economy. It is quite conceivable that the virus will be under control in the second half of the year. The massive fiscal stimulus announced by the US, UK, Europe and China, combined with falling central bank rates to zero or below, leading to a weaker US Dollar, are normally supporting factors for emerging market investments. We expect the stocks that meet our selection criteria to recover in this scenario, especially after the de-rating we are experiencing now.
Meanwhile our team members operate from different physically separated locations and they are well equipped to work remotely and are easily accessible by phone and email.
Thank you for your confidence in TCM Investment Funds in this challenging time. We hope that you as well as your family and friends remain safe and sound. If you have any further questions, please contact Mr. Gerald van der Boon, manager Investor Relations.
TCM Investment Funds
Joure, March 26, 2020