Background

The VT Argonaut Flexible Fund (‘Flexible Fund’) launched on 11-Oct-24 following the merger of the VT Argonaut European Alpha Fund (‘Alpha Fund’) and the VT Argonaut Equity Income Fund (‘Income Fund’) via a “Scheme of Arrangement” following approval from unitholders.

The Flexible Fund is a long-only strategy combining Argonaut’s high conviction global equity portfolio with greater flexibility for tactical allocations to government bonds, cash, and precious metals as diversification tools to mitigate volatility and/or enhance returns. The Fund’s equity exposure will vary according to market conditions but is expected to be 50-80%. Its geographic scope is global, with a focus on developed Pan-European and North American assets. 

For unitholders in the old Argonaut European Alpha and Argonaut Equity Income Funds, all units issued for the Flexible Fund have the same acquisition cost and acquisition date for the purposes of tax on capital gains as your existing units and thus the merger did not give rise to a capital gains charge.

The reason for the merger of the European Alpha and Equity Income Funds into the Flexible Fund was investment related. We believe a global mandate (rather than one restricted to Europe-ex-UK) and the discretion to be able to invest in non-equity instruments will enhance the overall investment proposition for current and prospective unit holders, producing superior absolute and risk-adjusted returns over the long term.

We have back-tested the returns over two decades for this proposed strategy using a 2/3rds fixed allocation to Argonaut’s flagship fund equity portfolio together with a fixed allocations to T-Bills, Cash and Gold. The results are below.

Simulated Track Record

Methodology 

Equity exposure: Given the Flexible Fund is able – like the VT Argonaut Absolute Return Fund (AR Fund) – to invest in the US as well as Europe, we have taken the equity “asset” return as the monthly return on the long book of the AR fund grossed up or down to 100%. In order to incorporate dynamic allocation based on historic behaviour, we have used two rules for monthly weighting to “equities”:

1. It should always be 2/3rds of the AR fund allocation as a % of NAV. i.e. if AR fund is 100% exposed then the Flexible fund is 66.6% exposed.
2. The equity exposure of the Flexible fund should have a maximum soft limit of 80% (only relevant if AR fund long exposure is over 120%).

Equity returns prior to the launch of the VT Argonaut Absolute Return Fund were taken from the long only European equity funds managed by Barry Norris at the time. The source of these equity returns are as follows:

• Nov-02 to May-05 Neptune European Opportunities Fund
• May-05 to Feb-09 VT Argonaut European Alpha Fund
• Feb-09 to date VT Argonaut Absolute Return Fund

Non-Equity Exposure: Bond exposure calculated using a fixed exposure of 10% of NAV, using US Treasury Bills (unhedged). Gold exposure calculated using a fixed exposure of 10%, using the WisdomTree Physical Gold ETF. Cash is calculated as the residual of the allocation to the other 3 asset classes above, using the Barclays Benchmark Overnight GBP Cash Index.