At Trimark, we pride ourselves on being active managers, but that doesn’t mean we’re active traders. Our funds generally have a lower turnover rate than the average mutual fund because we invest for the long-term and we invest with conviction.
Typically, you can expect turnover on Trimark Global Fundamental Equity Fund to be somewhere between 15% to 20% and a five- to six-year holding period.
That said, in today’s market environment we’re experiencing a lower than normal turnover across our global fund mandates.
For example, in Trimark Global Fundamental Equity Fund, our turnover is currently around 10%, which is low for me. On its face, that suggests a 10-year average holding period. I can’t tell you whether my turnover is going to be under 10% for the next five years, but that’s the reality of the current market environment.
Generally speaking, the market is fully valued. I’m not saying the market is overvalued – there are plenty of stocks that are overvalued and plenty that are marginally undervalued. But I’m looking for stocks trading at the 30% intrinsic discount. Right now those are few and far between, so I’m holding what I have until the market shifts.
We’re taking advantage of short-term volatility to upgrade our existing positions in high-quality companies with strong cash flows. We’re selling the companies who fit into a riskier cash-flow category. This frees up cash to put into the companies with more structurally stable and sound cash flows. We haven’t taken any large positions, but we’re further de-risking an already de-risked portfolio.
What does this mean for short and long-term? We hold high-quality compounding companies with “very good” to “very high” return on invested capital to generate a lot of cash which should grow and compound over time. But, if we get into a downturn or we get into issues within the global market, these companies also have some of the most stable and sustaining cash flows that I know.
Do you have any questions about low turnover? Feel free to leave a comment or question below or via e-mail.
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