Tell me a bit about the fund.
We are equity managers. We are a long only fund. We have three funds: a core fund, an emerging fund, and a more concentrated fund. We tend to run relatively concentrated portfolios, which take quite differentiated and contrarian positions.
A lot of what we do is developing the investment insights and then testing them through our own proprietary work. We have a team of 10 investors in the Australian equity investment team, including myself, who act as the portfolio managers, and then a team of eight sector specialists.
Are you finding a lot of value in Australian equities?
From our perspective, we can see absolute and relative value in the market at the moment, but it is quite disparate.
[There is] the group of what you would call expensive, most attractive stocks. In that, I would include stocks with high yields and defensive characteristics, which from our perspective look like logical things, but do look quite expensive.
At the other end of the spectrum, we have seen groups of stocks, quality, cyclical, the longer dated investment ideas where we think there is some pretty compelling value there.
How do you analyse your stock choices?
Our approach is to develop investment insights that we think are differentiated from the markets, and then we do a lot of independent proprietary work testing those insights. In any given week we could be talking to medical oncologists in the United States to test a healthcare stock idea, we could be talking to Turkish scrap dealers, or we could be visiting iron ore mines in remote parts of China - all with the view of testing independently the investment insights we have.
With a team of 10 people, what that means is we are doing more than a thousand company meetings a year, which extend from the chairman of the company through to competitors, customers and unlisted market participants.
Do you invest in small or large cap companies?
We will look at the ASX/300. The gauging factor is liquidity. If the stock does not have adequate liquidity, we will not invest in it. But pretty much any opportunity in the ASX/300 is where we will focus.
It seems like a concentrated approach. Are there any risks in terms of lack of diversification?
We think you can get more than adequate diversification in a portfolio of around 30 stocks, but we always have risk as a big focus in the portfolio. We always want to make sure we have good segmentation of risk in terms of the ideas that are represented in the portfolio.
But, having that level of concentration means you are [going to be] influenced, and the outcomes are very driven by stocks insights that you have.
What type of investor do you look to attract?
We have a range of investors. We have a very substantial institutional client base, ranging from industry super funds to platforms, right across the retail client section as well. So we have got retail, high net worth, industry and institutional clients.
Is the fund at capacity?
We want to make sure we maintain discipline around capacity. We have got very clear parameters for what we see as capacity for our investment for the portfolio. At the moment we are at around 40 per cent for capacity, so plenty of room to grow.
Do you see the Fed’s tapering of QE changing your investment decisions?
At the moment, our fund has got a very strong bias to US exposed businesses. That is, companies that will benefit from what we see as a favourable backdrop to an improving US economy.
I think that in terms of what that means for the US economy, it is equivalent to a good problem, and it is only occurring because the economy is improving. So to the extent that it reflects falling unemployment, improving activity, improving demand in the US economy, that should be a benefit for the businesses that we are invested in.
The second benefit is obviously the US currency, to the extent that it means the US dollar is strengthened relative to the Australian dollar. So various companies will benefit in terms of their earnings.
Do you hedge currency?
No, we don’t have hedging in the portfolio. But we do think about exposure to currency at the portfolio level.
