In August, the Evenlode Global Opportunities fund modestly lagged its comparator benchmark, the MSCI World Index. This narrow performance differential belies the drama of the month in which heightened volatility in equity markets drove the VIX index (a measure of market fluctuations) to 4-year highs. Major indices dropped sharply at the month's start, driven by weak US manufacturing and employment data sparking recession fears. Adding to the turbulence, an unexpected rate hike from the Bank of Japan reversed the yen carry trade^[1]. The S&P 500 and MSCI World Index had both lost nearly 6% by 5 August, with Nvidia, Tesla, and Amazon each falling over 13% in the same period. The Evenlode Global Opportunities fund outperformed the MSCI World Index by approximately 200bps during the same period (USD terms). This resilience is characteristic of Evenlode funds and a direct result of our disciplined approach to valuation and risk management. Throughout the rest of the month index valuations bounced back, primarily due to the strong performance of cyclical subsectors such as semiconductors, banks, and capital goods.

The final corporate earnings reports for the second calendar quarter were also announced this month. The Evenlode Global Opportunities portfolio companies continue to post encouraging fundamentals, with portfolio weighted organic revenues increasing 7.5% and adjusted operating margins remaining steady. There were some notable underperformers, all of which face short-term headwinds. Clarkson, the UK listed shipping broker, disappointed as revenues missed expectations that had risen alongside the ClarkSea Index (a measure of the cost of shipping). Nintendo, the Japanese games manufacturer, reported that it has entered a cyclical trough in console and game sales, as expected, before the launch of new console generation (the Switch 2). Finally Airbnb, the American vacation rental company, announced slowing growth, impacted by delays in customer bookings in the US driven by weakening consumer sentiment. Such share price declines, when driven by short-term data or cyclical trends, present a valuation opportunity – but only if our long-term investment thesis continues intact. We remain committed to deepening our understanding of the businesses and industries we invest in, aiming to deliver long-term returns for our co-investors.

^[1] The yen carry trade involves investors borrowing the yen (as Japan has had low interest rates compared to other countries), then using it to buy currencies and assets offering higher yields. A recent increase in Japanese interest rates has led to the yen strengthening and investors placing trades to reduce their positions.