Many happy returns
The strength of Smallco Investment Funds’ returns over the last 12 months made it a sure winner of the equities (long short) category this year's Money Management/Lonsec Fund Manager of the Year awards.
The fund returned 65 per cent over the 12 months to December 2012, 22 per cent over the last three years, and 13 per cent per annum over the last five years, according to managing director Rob Hopkins.
High-quality industrials and internet stocks gave the fund the impetus to reach that high return last year, Hopkins said.
The fund also moved to a much more conservative approach to guard its returns towards the end of last year, building up a 25 per cent weighting to cash and holding stocks with very high price-to-earnings ratios, he said.
The only way people should invest now is to pay cheaply for stocks that give good long-term earnings growth, and eventually the market will pay good money for them, Hopkins said.
“As long as earnings per share are going in the right direction, then the performance of the share price will go in the right direction in due course,” he said.
Smallco’s fund managers have stockbroking backgrounds and spend a lot of time doing fundamental analysis with companies and creating their own earnings forecasts.
That approach forces managers to understand the company at a much higher level than just reading someone else’s research, Hopkins said.
A well-established investment process was behind Perpetual’s nomination as a finalist this year, according to fund manager Paul Skamvougeras.
The Share Plus Long-Short fund searches for quality companies that represent value for investors, and their investment filtering process allows them to do that, he said. That process has been in place for over 20 years, he said.
Perpetual relies on its own internal bottom-up research for that filtering process, using a total of 12 analysts to contribute information.
“If our view is materially different to where the share price is or what the market is thinking, then we’ll initiate a short position,” Skamvougeras said.
However, Skamvougeras warns that fund managers should not dilute the value of their portfolios on the long position by chasing cyclical companies.
Finalist Platinum Asset Management was nominated because of its dual approach of index-unaware investment and seeking out neglected companies, according to fund manager for the European Fund, Clay Smolinski.
Investors were telling him for two years that Europe was uninvestible, he said.
It’s precisely at those moments that companies become very cheap and you can get the best reward, Smolinski said.
Platinum’s index-unaware approach allows it to ignore companies that are uninteresting, he added.
Investing isn’t only about investing in the best companies out there, but about the price you pay for them, he said.
Recommended for you
Lonsec and SQM Research have highlighted manager selection as a crucial risk for financial advisers when it comes to private market investments, particularly due to the clear performance dispersion.
Macquarie Asset Management has indicated its desire to commit the fast-growing wealth business in Australia by divesting part of its public investment business to Japanese investment bank Nomura.
Australia’s “sophisticated” financial services industry is a magnet for offshore fund managers, according to a global firm.
The latest Morningstar asset manager survey believes ETF providers are likely to retain the market share they have gained from active managers.
