A rigorous approach to growth at Perennial

At a time when plenty of financial services companies are struggling under market pressures, boutique funds manager Perennial Growth Management is performing in line with its name.

“Growth is scarce today and is therefore more valuable — an ideal environment for our style of investing,” Perennial Growth Management partner Lee Mickelburough said.

That is exactly how this year’s top firm in the Australian Equities (Broad Cap) category rationalised its win.

And while the judge of this year’s awards, Lonsec, agreed that Perennial enjoys many of the features commonly attributed to boutique firms, it also insisted that a high quality investment team is equally fundamental to a firm’s successes.

“The investment team has above average levels of experience across the team and has demonstrated a high level of team stability over recent years.

“The manager has added resources where required, including a dedicated dealing resource in 2007, and at current funds under management does not have any major capacity constraints,” Lonsec said.

When determining an attractive investment option, Mickelburough said he looks at the likelihood of a company’s future growth as the starting point, and then applies rigorous financial analysis to determine if the company can grow profitably.

“Finally, we value the cash flows the business produces over its full lifecycle to determine its long-term valuation.

“We end up with a portfolio of companies that are growing strongly, profitably and are undervalued,” Mickelburough said.

While Mickelburough was hesitant to discuss detailed valuations on a company’s future growth potential, he did say Perennial Growth’s key investment process is to take into account realistic expectations of sector, industry and product lifecycles when looking at a potential investment.

“By understanding what a company is worth, we can make sure that we don’t overpay for the future,” he said.

Full credit can also be given this year to Greencape Capital, which was a finalist in both the Australian Equities (Broad Cap) and Rising Star categories.

Greencape Broadcap Fund portfolio manager Matthew Ryland said the firm’s achievements come from a robust and transparent investment process, which has resulted in consistent performance records.

“Greencape is a bottom-up stock picking manager, with our efforts focused heavily on an intensive and targeted visitation program encompassing all participants in a given supply chain — suppliers, customers, competitors, regulators, company officials, offshore competitors.

“Piecing together information from various sources allows us to develop proprietary insights and ultimately arrive at better informed and high conviction investment decisions,” Ryland said.

The other finalist is ING Investment Management (INGIM) for its Select Leaders Fund, headed up by Paul Cuddy.

“INGIM’s focus on earnings risk and the quality of a company’s management team has been a key part of our success.

“Clearly, our disciplined and structured process has served us well during this recent market downturn,” Cuddy said.

— Laine Lister