Market Capitulations & Narrative Shifts with Adam Rackley of Cape Wrath Capital

In the Company of Mavericks

Back in March this year, David Seaman of Alpha Cygni Asset Management joined me for a conversation with Adam Rackley, the founder and fund manager at Cape Wrath Capital.

Adam epitomises the philosophy of doing things differently when it comes to investing in UK equities. He has pursued his unique approach since founding Cape Wrath in 2016 using what he describes as a behavioural value strategy.

He looks to identify market capitulation events and narrative shifts to cycle capital into shares when they are driven by emotion more than rationality. He then looks to exit positions when narrative shifts lead to equity revaluations to his appraised fair value.

Adam runs his fund according to what he calls the Rules of Wrath, not the established conventional rules of thumb that seek quality companies and long-term holding periods that try to avoid volatility.

No, for Adam it is a marketing strategy designed to discourage investors who can’t stomach the journey into the deep value that exists in the UK market. He wants a band of loyal investors who understand and back his strategy, a strategy he is fully committed to and invested in.

While he has all the credentials of a conventional equity fund manager, Adam is anything but. Previously an army officer, Adam has degrees in PPE and law and the CFA qualification.

He has also rowed the Atlantic, written a book, swam the channel, cycled from Land’s End to John O’Groats, and lived and worked in India for several years. He is now based in North Wales.

According to Morningstar, only one of 72 smaller company funds outperformed the UK small-cap index last year. That fund was Cape Wrath. A one-year wonder? Well, not exactly.

As of the end of May this year, Cape Wrath has significantly outperformed its benchmarks over one month, six months, one year, and five years by sticking to and evolving its rigorous investment strategy and process.

This is a fascinating conversation in which Adam delves into some examples of how his strategy has played out and how he hopes to develop his process further.

He then looks forward to closing the fund to new investors, switching off his LinkedIn account, and retiring to his library to do what he enjoys best: picking undervalued shares.

Please enjoy our conversation with the maverick investor, Adam Rackley.

Made possible by Progressive Equity.