Having faith in facing headwinds and change
Australian Equities (Broad Cap)
Winner
Allan Gray Australia Equity Fund
Finalists
Lazard Select Australian Equity Fund – W Class
Maple-Brown Abbott Australian Share Fund – Wholesale
Seeking out companies that are going through change or facing headwinds has allowed the Allan Gray Australia Equity Fund to shine.
The deep value, long-term, contrarian fund manager said it looked to buy companies facing cyclical and structural changes at prices that were significantly lower than fair value.
Allan Gray’s Australian equities portfolio analyst, Simon Mawhinney, said: “It might be cyclical in nature where the investment community is worried about cyclical headwinds which either are clearly coming or have been in force for several years, and the investment community has essentially lacked the patience to wait, or the company is under stock specific bad news”.
“Think of a minor that has production issues and which as a result has reflected over the share price and you can buy it cheaply, and we look at if the company can manage to sort out their problems.”
While Mawhinney said there was no exact science to this approach, the fund had performed in line with the stock market despite it being a bumpy ride.
“We don’t obsess about trying to predict what might happen for the rest of the year. We just focus on individual, bottom-up stock analysis and the rest just falls out,” he said.
Similarly, active manager, Lazard also embraced bottom-up fundamental stock selection to identify companies that traded at a discount relative to their intrinsic value.
The firm’s portfolio manager, Rob Osborn, said: “Many value oriented managers suffered in recent years after ‘cheap’ securities (or companies with high dividend yield, low price-to-earnings multiples, or low price-to-book ratios) significantly underperformed more highly valued securities in Australia and around the world”.
“We don’t invest on the basis of style factor, near-term multiples, or yields, but rather on our longer term valuations. This meant we were not impacted like some of our peers and were able to generate good performance for clients throughout the period.”
Maple-Brown Abbott’s head of Australian equities, Dougal Maple-Brown, attributed his fund’s success to the fact that it had a unique corporate memory since establishing in 1986.
“We are a long-only value fund and our approach has been tried and tested through cycles, and we have the discipline to stick to it,” Maple-Brown said.
“We’re value, contrarian, bottom-up stock pickers, usually conservative. While you have to take risks in this game we’re conscious when managing our clients’ money,” he said.
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