Perpetual's ups and downs

australian-equities/fund-manager/lonsec/portfolio-manager/

27 May 2011
| By Angela Faherty |
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A thorough understanding of the quality of a company and its relative valuation are the reasons behind the success of Perpetual Investments’ Shares Plus Long Short Fund, according to head of equities John Sevior.

The fund topped the rankings in the Money Management/Lonsec Fund Manager of the Year Australian Equities Long Short category for its fundamental, value-style approach.

According to Lonsec, the fund delivered a very strong result for investors in the 2010 calendar year with an excess return versus the S&P/ASX 300 Accumulation Index of 7.7 per cent post fees.

The manager’s investment style enables it to construct portfolios that take advantage of both positive and negative views on stocks, ensuring it delivers returns for its clients.

“We believe we are often able to perceive a value of a company that is different from the opinion of the market by looking for research opportunities away from common sources,” Sevior said.

“Therefore, outperformance can be achieved through a selection of securities trading at a different valuation to their inherent value.”

Lonsec praised Perpetual’s review of the fund’s mandate in 2010, which it said resulted in an improved fund structure.

The key changes included the appointment of Paul Skamvougeras, a dedicated portfolio manager with direct short selling experience, a revised short selling process that reflects the skill set and experience of the portfolio manager, and the adoption of a more concentrated portfolio construction approach.

“These changes are an improvement on the previous fund structure and as a result, has increased conviction in the fund’s ability to meet investment objectives,” Lonsec said.

Also commended in the Australian Equities Long Short category was last year’s winner, the Smallco Investment Fund.

The fund has four very experienced senior portfolio managers with detailed bottom-up fundamental research backgrounds and the firm specialises in the smaller end of the market.

The fund typically holds 25-35 stocks and prides itself on being a capacity conscious, concentrated, small cap, index unaware Australian equities fund with the potential to short sell small cap stocks, says Rob Hopkins, managing director at Smallco.

“We are very conscious of capacity and will limit funds under management to ensure the Smallco Investment Fund can continue to take meaningful positions in smaller companies without investor returns being affected by the time it takes to establish or exit an investment,” he said.

Hopkins added that as part of its strategy, the fund was closed in 2007 at a comparatively low level of FUM in contrast to its peers, but has since reopened to new investors.

Finalist K2 Asset Management also saw its Australian Absolute Return Fund acknowledged in the Australian Equities Long Short category. Since inception in October 1999, it has consistently outperformed the market and delivered clients a 14.1 per cent return.

David Poppenbeek, head of Australian Strategy at K2 Asset Management, said: “The fund is managed with an absolute return focus, achieving strong returns but also protecting capital in volatile markets. The funds are managed with the flexibility to use cash to protect capital and use shorting when and if appropriate,” he said.

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