2021 started in much the same way that 2020 ended; a push and pull between rolling global lockdowns and a comatose economy, offset by the vaccine rollout and an approaching light at the end of the tunnel.

Whilst these cyclical headwinds caused by the Coronavirus may drive the price of many of our investments, structural changes will have a greater effect on their value. It is with both in mind that we made the difficult decision over the month to part ways with a long-term holding for the funds in Compass Group.

Compass are the global market leader for outsourced catering operations and generate profits by providing cost-effective mass catering at sports stadiums, schools, hospitals and offices - the latter is reported under the segment ‘Business & Industry’ and has historically made up roughly 40% of revenues. Cyclical challenges within their Sports & Leisure franchises are clear but we think structural changes in the way that we consume office space as society will hinder Compass and help flexible office operators such as Workspace, also held in the fund, much further into the future.

We have felt that as the global leader with a great competitive advantage through their size and scale, Compass would come out of this crisis in a great position to grow share in a difficult catering market; a greater share of a smaller pie so to speak. We have been (and are still) unsure which of these would be the dominant factor but with a weakened balance sheet and what we see as a full valuation, we feel that it is prudent that we don’t wait to find out.

We reallocated the capital into existing holdings such as Sage, Burberry and Smith & Nephew where we felt that cyclical headwinds might have dampened the price but that long-term value was unaffected.

James Godrich, fund manager of the CSI Funds.

The value of securities and their income can fall as well as rise. Past performance should not be seen as an indication of future results. All views expressed are those of the author and should not be considered a recommendation or solicitation to buy or sell any products or securities.


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