PHILOSOPHY

The investment philosophy of Logos Fund revolves around three key concepts:

Be fearful when others are greedy, and greedy when others   are fearful

A famous quote by super investor Warren Buffet, and core to our philosophy. Due to a focus on short-term events, behavioral biases, and mandates of institutional investors, valuations can deviate from the fundamental value of businesses. We want to invest our capital where the discrepancy between price and value is largest, and the risk reward profile is best. These situations are most likely to occur when sentiment is extremely positive or negative.

TRY TO MANAGE RISK, NOT AVOID IT

‘Uncertainty’ (Risk) is the sole reason for equity investments to yield returns in excess of the risk free rate, and yet, often investors say they want to minimize downside risk. If that is your goal, the best way is not to invest in equities at all. It is true that a severe loss of capital has a huge negative impact on long-term returns. After all, when losing 50% of capital, you need a 100% gain to offset the loss. The Logos Fund aims to manage downside risks, rather than avoid it. We maintain a diversified investment portfolio to reduce idiosyncratic risk, and use short selling to (partly) hedge market risk. Furthermore, we size positions based on the level of downside risk. The higher the downside risk, the smaller the percentage of capital allocated. This way, we keep our exposure to highly attractive risk/reward situations, while managing the risk of extreme drawdowns.

Know where to play

When selecting investments opportunities, it is crucial to acknowledge the limits of one’s ability to outsmart the markets. You need to know where to play. Some variables in investment decisions are so complex, that it would be foolish to believe that our own estimate of that variable is any better than that of the market. Examples include future commodity prices, exchange rates, or GDP growth numbers. We avoid investment thesis that are solely based on such variables. Instead, we try to focus on opportunities arising due to factors we do understand.

By incorporating these three concepts in the investment decisions making process, Logos Fund aims to outperform market returns over the long term.

Logos Fund pursues two types of strategies in line with this philosophy -> read more