NUTSHELL GROWTH: The global investing minnow who says he'll beat Fundsmith next year
Global investment fund In short, growth has made a reasonable start since launching during lockdown in May 2020, generating a total return of 24 percent.
But it wasn't easy: the share price fell sharply in the aftermath of the financial crisis in November 2022, before rebounding strongly this year.
The fund remains a minnow with assets of just over £20 million, but it has the backing of British billionaire Lord Spencer, who is an investor in both the fund and Nutshell Asset Management, the investment company that manages it.
Earlier this month, Spencer confidently predicted that Nutshell Growth would deliver returns for investors by 2024 that exceed those of Fundsmith Equity, a £23 billion global fund that has delivered an annual return of 15.1 percent since its launch in November 2010 .
The Fundsmith fund is managed by Terry Smith, as is Michael Spencer, an icon of the city.
Spencer said he would put his money where his mouth is to donate to The Mail on Sunday charity if Nutshell Growth were to triumph next year.
Mark Ellis, the fund's investment manager, is unimpressed by the challenge posed by Spencer. “Competition is good,” he says.
'The PR is good and it's great that Michael appreciates the investment process that underpins the fund I manage.'
Ellis, who worked as a trader in the city for more than 25 years before founding Nutshell Asset Management in 2019, is someone who loves nothing more than analyzing companies and poring over spreadsheets.
He is rigorous in his investment approach, rating 600 companies on more than 30 different factors, using data going back 20 years. They come from all over the world, although most are found in the United States.
Currently, 37 companies are part of the fund: well-known names such as the American giant Alphabet (owner of Google) and more unknown brands such as the French healthcare specialist Equasens.
Ellis uses artificial intelligence to crunch a lot of the numbers, for example analyzing companies' profit margins, the ability of publicly traded companies to maintain shareholder capital in times of recession, and how stock prices react to the actions of directors or reported Results.
He's also happy to make some profits on individual stocks when their share prices rise – and recalibrates the portfolio twice a month to make sure it's in line with the target bet he's set. He calls this 'agile rebalancing'.
“Each stock must continually justify its place in the fund,” he adds.
He also uses AI to assess how optimistic and bearish CEOs are about their companies in calls to analysts and investors.
“A lot of the work I do is analytical,” says Ellis.
'What I'm trying to create is an edge. Yes, I could just keep and work with the companies I like, but I also want to do a little extra for investors.”
Like Spencer, Ellis is a substantial investor in the fund and owns two-thirds of Nutshell Asset Management, which manages around £33 million in assets. “I love my job,” he says. 'All my family's investments are tied up in the fund.'
The fund will not be involved in tobacco stocks. “My mother's whole family smoked and they died in their 60s. Tobacco manufacturers are a no go as far as I'm concerned. Moreover, the companies are always vulnerable to fines and lawsuits,” he says.
The fund costs are on the high side at 1.89 percent – a consequence of its small size.
jeff.prestridge@mailonsunday.co.uk