​December was a slightly soft month for performance. The last few months have been dominated by deteriorating economic data led by a slowdown in China, macro-political concerns in Europe and ever more unpredictable moves being made by Donald Trump. The fund’s underperformance during the month was attributable to two main factors.

First, Inditex suffered from a profit warning during the month. The damage suffered by the Trust was limited by the fact that we had significantly reduced the position during the second half of 2018. Inditex remains a very good company, but one that operates in an increasingly difficult end market environment; we have retained a small position for the moment. Second, we have zero exposure to Utilities, which was the best performing sector in December. We can understand why the sector might seem attractive in the short term due to its lack of economic sensitivity and ‘under-ownership’ by institutional investors, but we remain completely unconvinced as to the long term merits of being exposed to any stock within the sector. Better performances came from our positions in Epiroc, Munich Re and Getlink.

We did not trade very much during December. However, we have continued to reduce position sizes in both Amundi and in Deutsche Post. With the former, we are concerned about the medium term outlook for flows given weak market conditions and with the latter, we are troubled by the ongoing regulatory discussions in the German parcels business and by the potential for the Express business to see some level of slowdown on account of softer global trade volumes.

As ever, we continue to spend the majority of our time looking for companies that can generate sustainably high returns, whilst also trying to identify specific opportunities where companies are generating average or low returns where we see the scope for a significant improvement in the return profile.