The essence of the Orchard strategy could not be simpler. Like many managers, we aim to buy the shares of good quality companies at prices at which we find them attractive and, once we have done so, try to establish the price above which we would no longer find those shares attractive and look to sell them at that price.
How we execute that basic strategy is how we differentiate ourselves and, we believe, add significant value for our investors. The first part of our investment process is similar to many other managers as we discuss further in the investment process section of this website. However what we do next is where we differ from most, if not all of our competitors and do so for good reason. Instead of accepting the price at which a stock is trading in the market, we establish the price at which we are willing to buy the stock and commit to do so at that price. The benefit to the Orchard fund is that we are paid a premium for doing so, despite only agreeing to buy that stock some way below the current market price.
If that seems too good to be true, let’s look at why this happens in a little more detail. Unlike the person who buys a stock directly, the amount we are able to make is limited to the premium received. Some tell us that this is asymmetrical by taking all of the risk with very limited upside. We beg to differ. Unlike many managers who dream of markets rising by high double digits each year, we believe that by agreeing to buy good quality solid companies at prices we find attractive, we will be able to produce a more stable return profile, targeting 6-8% return per annum over the business cycle.
Banking gains, minimising losses
By minimising our losses when markets fall, we believe that such a performance will beat most markets over the business cycle.
Over the first 16 years of this strategy we have materially out-performed equity markets with significantly lower risk. Over the same period, we have out-performed the > 1 year UK Gilt market, and the Iboxx Corporate Bond Index, albeit with slightly more risk.
We know what we want to do, we know how to do it, and we have very high expectations that the results that this will produce will match our past experiences and clients’ expectations.
Orchard Wealth Management Ltd
4 Wharf Street
Orchard Wealth Management Ltd is licensed and regulated by the Jersey Financial Services Commission in the conduct of investment business.
The Orchard Funds PLC is a recognised fund in the UK under Article 264 of the Financial Services and Markets Act 2000.