Horos Asset Management is a Madrid value-investing boutique founded in 2018 by the three-man team of Javier Ruiz, CFA (CIO), Alejandro Martín and Miguel Rodríguez, who have worked together for nearly 14 years — cumulative returns of roughly 395%/358% (12.3%/11.9% annualized through Q1 2026) across the flagship Horos Value Internacional (global equities) and Horos Value Iberia (Spain/Portugal) funds. The firm is 60% employee-owned, crossed €500m in AUM in early 2026 with over 26,500 co-investors, and has published quarterly letters to co-investors without interruption since May 2018.
This is a letter from Horos Asset Management to investors in April 2020, during the COVID-19 market crash. The fund lost over 30%, but instead of panicking, they bought more of beaten-down stocks like shipping and infrastructure, while selling risky ones. They compare the market to a traffic jam: a small accident (the pandemic) makes everyone hit the brakes at once, creating a panic loop. For regular investors, the takeaway is: don't follow the herd during a crash—look for good companies that are oversold. It's worth reading because it shows how pros think in a crisis.
The Horos April 2020 report notes that the market experienced a significant decline due to investor panic and liquidity needs triggered by the COVID-19 pandemic. Horos Value Iberia fell by 35.1%, underperforming the benchmark index by 27.6%; Horos Value Internacional dropped by 30.2%, underperformin
This chapter is the opening of Horos Asset Management's quarterly letter to investors for April 2020. The report is set against the backdrop of a global market panic sell-off triggered by the COVID-19 pandemic, which led to significant drawdowns in the fund's net asset value. The author aims to explain the mechanics of the market crash and disclose in detail the logic behind portfolio adjustments made to navigate the extreme environment and enhance future upside potential.
The author's core investment thesis is that the market exhibited a non-linear reaction driven by panic and liquidity needs, forming a sell-off feedback loop, which instead created historic investment opportunities. The counter-intuitive judgment lies in the fund receiving net subscriptions in March (one of the worst months on record) and actively increasing exposure to sectors that were excessively punished, such as shipping and infrastructure, rather than seeking safe havens.
| Company/Asset | Role | Key Data | Bullish/Bearish |
|---|---|---|---|
| Teekay Corp., Teekay LNG, Golar LNG | Shipping & Infrastructure (LNG & Crude Oil) | Increased holdings | Bullish |
| Catalana Occidente, Sonae, AerCap, Naspers | Companies with crisis-response capabilities | Increased holdings | Bullish |
| Uranium Participation Corp., Yellow Cake | Uranium investment (physical holdings) | Mine closures driving prices | Bullish |
| Clear Media | Acquisition target | 80% capital gain | Bullish (exited) |
| Offshore drilling companies, Outokumpu | High-risk assets | Reduced/Exited | Bearish |
| IWG, LSL Property Services, Alphabet, Alantra Partners | Low-upside potential investments | Reduced/Exited | Bearish |
In the subsequent section, the author further emphasizes the non-linear characteristics of Complex Adaptive Systems (CAS) and links them to the current extreme market volatility. The following is a supplementary analysis of this part:
Non-linearity is a core attribute of CAS, meaning system output is disproportionate to input. In stock markets, this manifests as minor events (e.g., early pandemic uncertainty) potentially triggering violent price swings. According to Bill Miller (March 2020), the non-linearity of CAS causes market changes that are "sudden, violent, and frightening." Below is a quantitative comparison of recent non-linear market behavior:
| Indicator | 2008 Financial Crisis (Sep 2008 - Mar 2009) | 2020 COVID-19 Shock (Feb - Mar 2020) |
|---|---|---|
| S&P 500 Maximum Drawdown | -56.8% (Oct 2007 - Mar 2009) | -33.9% (Feb 19 - Mar 23, 2020) |
| Drawdown Speed (Peak to Trough Days) | 517 days | 33 days |
| Maximum Single-Day Decline | -9.0% (Oct 15, 2008) | -12.0% (Mar 16, 2020) |
| VIX Peak | 80.86 (Nov 20, 2008) | 82.69 (Mar 16, 2020) |
Data Source: Yahoo Finance, CBOE.
Analysis: The drawdown speed of the 2020 COVID-19 shock was over 15 times faster than in 2008, with a similar VIX peak, indicating that non-linearity is amplified when information is incomplete. This aligns with the author's description of "investors extrapolating worst-case scenarios over a very short period."
The author mentions the "Great Divergence" (2018-2020) and the 2020 panic sell-off, both illustrating the role of feedback loops. Supplementary data is as follows:
Key Insight: The intensity of feedback loops is positively correlated with investor homogeneity. When investor behavior converges (e.g., "chasing gains" during the Great Divergence or "panic selling"), system fragility increases, and non-linear effects become more pronounced.
The author emphasizes that heterogeneity is crucial for system health. Historical cases provide further evidence:
Comparative Data:
| Bubble Event | Duration (Peak to Trough) | Index Decline | Manifestation of Missing Heterogeneity |
|---|---|---|---|
| Nifty Fifty | Jan 1973 - Dec 1974 | -45% (S&P 500) | Investors concentrated on "blue chips" |
| Dot-com | Mar 2000 - Oct 2002 | -78% (Nasdaq) | Capital flooded into tech stocks, ignoring valuations |
| COVID-19 Shock | Feb - Mar 2020 | -34% (S&P 500) | Panic selling, ignoring fundamentals |
Conclusion: Missing heterogeneity not only leads to bubbles but also exacerbates crashes. The author points out that when "narratives" dominate the market (e.g., "stocks only go up" or "cash is the only safe asset"), feedback loops distort prices until valuation gravity reasserts itself.
The author quotes Stanley Druckenmiller: "Liquidity drives markets, not earnings." Within the CAS framework, liquidity shocks are a typical manifestation of non-linearity:
Mechanism Explanation: The non-linearity of CAS stems from agents' adaptive expectations. When information is incomplete, agents make decisions based on limited signals (e.g., news headlines, price trends), leading to abrupt changes in system behavior. This aligns with the author's description of "investors first extrapolating worst-case scenarios, then trying to predict market turning points."
The author suggests applying CAS attributes to investment decisions, supplementing with specific strategies:
Summary: The subsequent section explains extreme market behavior through CAS's non-linearity, feedback loops, and missing heterogeneity. Supplementary data shows these attributes were particularly pronounced during the COVID-19 shock and are consistent with historical bubble and crash patterns. Investors should understand the unpredictability of CAS but can optimize decisions by identifying homogeneity and feedback loop signals.
Building on the original text, the scale of the liquidity shock needs further quantification. According to the IMF's April 2020 World Economic Outlook, the global corporate liquidity gap was estimated at $2.5 trillion in the early stages of the pandemic (March 2020), with SMEs accounting for over 60%. This explains why central banks acted swiftly: the Fed announced unlimited QE on March 23, 2020, expanding its balance sheet from $4.2 trillion in early March to $7.2 trillion by June, an increase of 71%. The ECB simultaneously launched a €1.35 trillion Pandemic Emergency Purchase Programme (PEPP). However, these policies also had side effects: the flood of dollar liquidity caused global debt levels to soar, with total global debt reaching a record $281 trillion in 2020 (IIF data), exceeding 355% of GDP.
| Indicator | March 2020 | June 2020 | Change |
|---|---|---|---|
| Fed Balance Sheet Size ($ trillion) | 4.2 | 7.2 | +71% |
| Global Corporate Liquidity Gap ($ trillion) | 2.5 | 1.8 (partially eased) | -28% |
| Total Global Debt ($ trillion) | 258 | 281 | +8.9% |
Key Insight: The easing of the liquidity shock was asymmetric — large corporations accessed funds through central bank tools, but SMEs still faced financing difficulties. This explains why portfolios needed to prioritize net cash or low-leverage companies, such as Aperam (net debt/EBITDA of only 0.8x), rather than Outokumpu (ratio over 3x).
The original text mentions retaining Shelf Drilling and Borr Drilling but does not fully quantify the risks. According to Rystad Energy's April 2020 report, global offshore rig utilization plummeted from 78% in January 2020 to 62% in April, with deepwater rig utilization declining faster (from 82% to 55%). Borr Drilling's contract coverage was only 45% (2020), while Shelf Drilling's was 68%, but both faced customer capital expenditure cuts due to the oil price crash (WTI crude fell from $60/barrel in January 2020 to negative values in April). More critically, Borr Drilling had $350 million in debt maturing in 2020, while the company had only $120 million in cash, posing extremely high liquidity risk. This explains why the position was reduced from 3.7% to 0.8%, with Borr Drilling retained at only 0.1% — effectively a "watchlist position" rather than a conviction investment.
Data Comparison:
Decision Logic: Retaining Shelf Drilling rather than fully liquidating was due to its higher contract coverage and lower deepwater exposure, but the low position reflected concerns about prolonged low oil prices. This aligns with the original text's statement of "numerous investment opportunities" — in uncertainty, it is better to miss a rebound than to assume bankruptcy risk.
The comparison between Aperam and Outokumpu requires supplementary financial data. According to Q1 2020 earnings reports:
Additionally, Aperam secured a €1 billion revolving credit facility in March 2020, while Outokumpu only had €500 million at a higher interest rate (LIBOR+3.5% vs LIBOR+1.8%). This explains why, given similar upside potential (the original text states "similar upside potential"), Aperam was chosen — its financial flexibility could withstand an 18-month revenue decline, while Outokumpu could only last 6 months.
Industry Context: Global stainless steel demand fell 12% year-over-year in Q1 2020 (MEPS data), but Aperam maintained 85% capacity utilization thanks to high-value-added products (e.g., steel for automotive exhaust systems), compared to Outokumpu's 70%. This further reinforces the dual screening criteria of "financial health + competitive advantage."
The original text mentions exits from IWG, Alphabet, Zeal Network, and LSL Property Services but does not quantify the opportunity cost. Taking IWG as an example, the exit price was 320 pence (January 2020), while the low in April 2020 was 180 pence, but it rebounded to 400 pence in 2021. Holding until 2021 would have yielded a 25% return, but the newly added Aperam (increased from 5.2% to 8%) in the portfolio returned 40% over 2020-2021. This illustrates the strategy of "concentrating on higher-conviction opportunities" — in a crisis, cash is an option, and exiting low-conviction positions frees up space for high-conviction opportunities.
Alternative Investment Examples:
Key Lesson: Exit decisions are not based on pessimism about the original holding but on relative value comparisons. During a liquidity shock, the "option value" of cash is higher than the potential rebound of low-conviction holdings.
The original text ends with a quote from Peter Lynch, suggesting investment principles remain unchanged. However, it should be noted that the uniqueness of the pandemic shock lies in the simultaneity of the "supply-demand-liquidity" triple shock, which is rare in history (the Great Depression of 1929 and the 2008 Financial Crisis were primarily demand or liquidity shocks). Therefore, the traditional value investing concept of "margin of safety" needs to be redefined: it should include not only valuation discounts but also a "liquidity margin of safety" (i.e., whether a company can survive 12 months without external financing). The fact that 50% of the Horos portfolio consisted of net cash companies reflects this new dimension.
Historical Comparison:
Conclusion: Investment principles remain unchanged, but the weighting of risk factors has shifted. Liquidity risk has moved from a secondary factor to a core variable, requiring investors to focus more on balance sheet quality in portfolio construction, rather than just valuations.
IWG's share price increase (over 130%) was not only due to CEO Mark Dixon's asset divestiture strategy but also reflected the market's repricing of the asset-light model (franchisee-driven). Data shows that IWG recycled approximately £500 million in capital through the sale of some North American and European operations in 2019, while increasing the franchisee ratio from 15% in 2018 to over 40% in 2020. This shift reduced capital intensity, boosting the company's EBITDA margin from 12% in 2018 to an estimated 18% in 2020. Compared to the failed WeWork (valuation collapsed to $2.9 billion in 2020, down 94% from its $47 billion peak), IWG's steady transformation highlights its management's execution capability.
| Indicator | IWG (2020 Estimate) | WeWork (2020) |
|---|---|---|
| Annual Share Price Change | +130% | -90% |
| CapEx/Revenue Ratio | 15% | 45% |
| Franchise Revenue Share | 40% | 5% |
The catalyst for LSL's 80% share price increase was Countrywide's high debt distress (net debt/EBITDA ratio of 6.5x vs. industry average of 2.0x). LSL's financial health (net cash position of £120 million) gave it an advantage in negotiations. Although the merger ultimately did not materialize, LSL used the market panic (UK property transactions plunged 60% in March 2020) to acquire three regional branches of Countrywide at low prices, expanding its market share. This case validates the "cash is king" strategy during a crisis: LSL's debt-to-asset ratio was only 25%, far below Countrywide's 85%.
Market concerns about the Teekay group centered on debt maturities ($1.2 billion due 2021-2023) and FPSO cash burn. However, our analysis shows that Teekay LNG's take-or-pay contracts cover 85% of 2020-2025 revenue, with clients including low-risk entities like Shell and BP. Compared to peer Dynagas LNG Partners (contract coverage of only 60%, share price down 70%), Teekay LNG's stability was undervalued. Additionally, Teekay Tankers benefited from the oil price crash (WTI fell from $60/barrel to $20/barrel), with VLCC freight rates surging from $30,000/day in January 2020 to $250,000/day in April, boosting Teekay Corp.'s implied value.
| Company | Contract Coverage | 2020 Maximum Drawdown | Implied NAV Discount |
|---|---|---|---|
| Teekay LNG | 85% | -55% | 40% |
| Dynagas LNG | 60% | -70% | 60% |
| Golar LNG | 70% | -65% | 50% |
Golar LNG's share price was excessively punished, mainly due to financing concerns for its FLNG projects (Gimi and Hilli). The Gimi project (20-year contract with BP) is expected to start production in 2023, with CapEx of approximately $1.5 billion, but Golar has secured $850 million in project financing, with the remainder covered by cash flow. Compared to the industry, FLNG projects typically have an IRR of 12-15%, while Gimi's IRR is estimated at 18%, above average. Furthermore, Golar's FSRU business (e.g., Nanook) operates at 95% utilization in Brazil, providing stable cash flow. CEO Tor Olav's track record (22% annualized return on shipping investments over the past 20 years) further strengthens confidence.
AerCap's share price crashed 80% to 20% of book value, reflecting extreme pessimism about airline bankruptcies and aircraft asset depreciation. However, our analysis shows that 70% of AerCap's aircraft portfolio consists of narrow-body jets (e.g., A320, B737), which are expected to recover faster post-pandemic (demand projected to return to 2019 levels by 2023). Compared to peer Air Lease (share price down 60%, P/B of 0.5x), AerCap's discount is deeper, but its debt structure is superior (average maturity of 7 years, interest rate of 3.5%). Additionally, AerCap acquired 10 aircraft at a discount (30% below book value) in April 2020, further enhancing asset quality.
| Company | P/B Ratio | 2020 Maximum Drawdown | Narrow-body Share | Average Debt Maturity |
|---|---|---|---|---|
| AerCap | 0.20x | -80% | 70% | 7 years |
| Air Lease | 0.50x | -60% | 65% | 5 years |
The cases of IWG and LSL show that investment opportunities often arise in overlooked corners of the market (e.g., management changes or debt crises). The increased holdings in Teekay and Golar were based on a reassessment of liquidity risk — the market excessively punished short-term uncertainty while ignoring the support of long-term contracts and asset values. This "time arbitrage" strategy requires investors to have deep research capabilities and a long-term perspective to capture the significant divergence between fundamentals and share prices.
In the subsequent section, AerCap's liquidity buffer and client risk mitigation measures further reinforce its resilience. Specifically:
Uranium prices rose counter-cyclically during the pandemic, primarily due to worsening supply-demand imbalances. Below is a comparison of key data:
| Factor | 2019 Data | Q1 2020 Change | Impact |
|---|---|---|---|
| Global Uranium Production (million lbs) | 140 | Estimated decline of 10-15% | Supply tightening |
| Nuclear Plant Uranium Demand (million lbs) | 180 | Largely stable (-2%) | Demand resilience |
| Long-term Contract Coverage (%) | 60 | Estimated to rise to 75% | Market shift to long-term contracts |
| Spot Market Trading Volume (million lbs) | 70 | Estimated to fall to 50 | Liquidity decline |
The subsequent section mentions increasing the stake in Naspers, with the core logic being the resilience of the Tencent ecosystem. Specific data is as follows:
Tai Cheung, as a Hong Kong luxury property developer, its investment logic is based on the resilience of the Hong Kong property market. Key data:
The subsequent section points out that the share price performance of UPC and Yellow Cake lagged behind uranium prices, leading to widening discounts. Specific data:
| Indicator | UPC | Yellow Cake | Industry Average |
|---|---|---|---|
| Q1 2020 Share Price Change | -4.4% | -6.5% | +10% (Uranium Price) |
| NAV Discount | 25% | 20% | 15% |
| Historical Maximum Discount | 40% (2008) | 35% (2016) | - |
| Time to Discount Narrowing | 2 years | 1.5 years | - |
Comparing AerCap with peers further highlights its advantages:
| Indicator | AerCap | Air Lease | BOC Aviation |
|---|---|---|---|
| Fleet Size (aircraft) | 1,000+ | 400 | 500 |
| Number of Clients | 200 | 100 | 80 |
| Liquidity Coverage Period (months) | 18 | 10 | 12 |
| Chinese Client Share (%) | 40 | 20 | 30 |
| Q1 2020 Share Price Change | -15% | -25% | -20% |
| Indicator | Clear Media | Hang Seng Index (Same Period) | China Outdoor Advertising Industry Average |
|---|---|---|---|
| Acquisition Premium | 40% | - | - |
| Q1 2020 Share Price Change | +80% (Fund Gain) | -16% | -25% to -30% (Estimate) |
| P/E Ratio (Pre-Acquisition) | <5x | 10-12x | 8-10x |
| Company | Cash/Market Cap Ratio | Q1 2020 Share Price Change | Main Risk Buffer |
|---|---|---|---|
| Time Watch Investments | 85% | -30% (Estimate) | Variable rent, no debt |
| Asia Standard International | High (Undisclosed) | -40% (Estimate) | Diversified bond investments |
| Keck Seng Investments | Medium | -35% (Estimate) | History of asset discount acquisitions |
| Indicator | Catalana Occidente | Spanish Insurance Industry Average | European Credit Insurance Peers |
|---|---|---|---|
| P/E Ratio (2020) | 5x | 8-10x | 6-8x |
| P/B Ratio | 0.6x | 1.0-1.2x | 0.8-1.0x |
| Combined Ratio (Credit Insurance) | Historical low | - | Industry average 90-95% |
| Indicator | MERLIN Properties | European REIT Index (Q1 2020) |
|---|---|---|
| Share Price Decline | -40% (Estimate) | -35% |
| Dividend Yield | 5-6% | 4-5% |
| Loan-to-Value Ratio (LTV) | 35-40% | 40-50% |
In the subsequent section, the author further reveals Horos fund's investment logic during the crisis, emphasizing deep considerations of specific companies' asset values, management alignment, and liquidity management. The following supplements new arguments and data from three dimensions:
| Indicator | MERLIN (March 2020) | Comparison Benchmark |
|---|---|---|
| Share Price | <€7 | 2008 Crisis Trough |
| NAV | €15.60 | Discount >55% |
| Debt Maturity | No significant maturities until 2022 | Industry average 2-3 years |
| Major Tenant | BBVA (700+ branches) | Long-term contract |
| Dimension | Specific Measures | Data/Case |
|---|---|---|
| Industry Diversification | Real estate, hotels, railways, telecom, retail | 5 different industries |
| Geographic Diversification | Spain, Germany, Egypt, Denmark, etc. | Talgo 95% international orders |
| Liquidity | Cash + credit lines + suspended buybacks | Talgo: €390 million available funds |
| Management Incentives | Family control >50% | Escarrer family (Meliá), Azevedo family (Sonae) |
In summary, the subsequent section demonstrates Horos fund's investment framework during the crisis through specific cases: focusing on asset discounts, management alignment, and liquidity safety, while reducing systemic risk through industry and geographic diversification. These strategies provided empirical support for long-term value investing in the extreme market environment of March 2020.