Why minimising losses is so powerful – even in bull markets
87%
Why is this number relevant? It’s currently the favourite stat for top-performing fund manager Richard Ivers, portfolio manager of the Prime Value Emerging Opportunities Fund
Ivers is most proud of this number because Prime Value Asset Management outperform 87% of the time in down markets.
“The foundation of our outperformance is in being able to manage the downside. It’s not just good stewardship, it’s good investing.”
As the ‘fastest bear market in history’ showed this time last year, markets can plunge quickly, and we can never be sure when the next correction – or crash – will occur.
From crisis to opportunity the market during coronavirus shows how powerful minimising losses can be, according to Ivers.
“The benefits from minimising losses are two-fold. Firstly, you better preserve the capital that you have. Secondly, and most powerfully, minimising losses allows you to maximise the buying opportunities which emerge in any market disruption.
“The coronavirus market correction opened the door to several good investments. Ongoing volatility has since provided more opportunities to buy quality companies.”
Capital preservation remains relevant as stocks march into bull market territory, according to Mr Ivers.
“You can still participate in a bull market while preserving capital. But you still need to pick companies which have strong balance sheets, good management and excellent prospects.
“Investing with an eye on capital preservation leaves you better positioned when the market experiences ructions, and better able to capitalise on the opportunities which emerge.”
Mr Ivers’ Prime Value Emerging Opportunities Fund has demonstrated how minimising losses can still deliver strong performance, after the Fund was ranked the second-highest performing Australian equities fund for 2020, according to Morningstar.
The Fund delivered 23.4 per cent (after fees) to investors for the calendar year, outperforming the market by 14.2 per cent (source: Morningstar).
The Fund has been a picture of consistency since launch over five years ago, having delivered 14.8 per cent (after fees) per annum to investors since inception to 28 February 2021.
Mr Ivers said targeting quality companies and avoiding the ‘hot stocks’ has been key to consistency. “Plenty of research shows fund managers which avoid big losses outperform the market in returns over time.”