Boutique fund managers raising the bar with key strategies

Boutique firms Ausbil, Bennelong, SG Hiscock, Bentham and Microequities have all received more than one fund with an impressive five crown rating.

Portfolio managers spoke to Money Management about investment strategy, corporate ethos and beating the benchmarks.

The consensus across the boutique fund managers was that a good, universal investment strategy is key to consistently outperform benchmark and provide meaningful returns for investors. 

Ausbil’s deputy head of equities and lead manager at 130/30 Focus, Gian Pandit, credited the five-crown rating to strong bottom-up stock selection and investment grade filtering and macroeconomic overlay.

Chief economist and associate director, debt and diversifieds, of Ausbil’s five-crown Balanced fund, Jim Chronis, said, “we start by identifying the key trends in the macroeconomic environment, the sectors that will benefit from those trends and then the companies which offer superior earnings prospects.”

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He credited meaningful excess returns for investors to a combination of reading the macroeconomic backdrop as well as having a continued focus on earnings, earnings revisions and business sustainability.

Bennelong Australian Equity Partners’ investment director, Julian Beaumont, agreed with the bottom-up stock picking approach, and credited their business-focused philosophy for good returns.

“We run an investment strategy that is very focused and very high conviction,” he said. “Regardless of what the economy throws at us or markets present to us, our stock-picking comes through,” he said.

SG Hiscock and Companies’ Stephen Hiscock said for consistent outperformance, having a high conviction about your stocks is key. 

“There’s always a balancing act between portfolio construction, given the risks that are inherent in having a high conviction portfolio, and expressing the fact that we’ve found these fabulous ideas in the portfolio.”

Hiscock said when it comes to investing in concentrated funds, an investor must “have the ability to hang on for the long term and have confidence in the manager” to reap returns.

Bentham’s High Yield and Syndicated Loan funds also received five-crown ratings, with portfolio manager Tyler Purviance crediting their experienced team, disciplined credit process and repeatable investment method.

He said the firm identified opportunities by comparing relative value for risk in credit markets, with a focus on preservation of capital, contributing to the outperformance of the Funds’ respective benchmarks. hang on for the long term,” and “confidence in the manager” to reap high returns over time.

Microequities’ chief executive and investments officer, Carlos Gill, said “a strict observance of a value based doctrine applied to a strong growing asset class [microcaps & small caps] are a powerful combination.”

All firms noted low volatility, but warned that 2018 could see a rise.

“The combination of solid growth and low interest rates has been a supportive backdrop for equity markets during 2017,” said Ausbil’s Pandit. “Volatility has been at historic lows for an extended period but is expected to rise during 2018,” he added.

Notwithstanding this, 130/30 Focus returned 14.7 per cent net of fees, exceeding the ASX 200’s return of 11.8 per cent by 2.9 per cent, and the Microcap fund returned an excess of 4.9 per cent returns.

Hiscock said the Emerging Companies fund had a pre-fee return of 16.1 per cent per annum compared to a benchmark of 7.2 per cent return per annum, while SGH’s 20 fund outperformed the ASX 300 by about 2.5 per cent per annum.

Gill also noted wins with the Microequities Deep Value Fund having delivered an annual compound return of 23.70 per cent, compared to its benchmark return of 10.77 per cent.