“In order to achieve superior results, an investor must be able - with some regularity - to find asymmetries: instances when the upside potential exceeds the downside risk. That’s what successful investing is all about.”
Asymmetric Opportunities Fund invests in a portfolio of primarily ASX-listed Securities outside (but not exclusively outside) the S&P/ASX 100. The Fund generally avoids making investments (through the acquisition of Securities) into the property and resource industries.
The investment objective of the Fund is to deliver a return to Investors (via distributions and/or capital appreciation) which is better than that of the S&P/ASX Small Industrials Accumulation Index, measured over 5 years or more.
The Manager aims for the Fund to achieve outperformance against the S&P/ASX Small Industrials Accumulation Index, as its name suggests, by identifying asymmetric opportunities.
The Fund is benchmark-unaware. The Portfolio is therefore very different from the portfolio composition of Fund’s benchmark, the S&P/ASX Small Industrials Accumulation Index
Attractive asymmetric investment opportunities can be found in:
High-quality growing businesses;
Out-of-favour companies facing short-term, surmountable headwinds;
Lesser-known or overlooked companies, especially smaller ones, with appealing prospects; and
“Special Situations” such as arbitraging takeovers.
Given the diversity of where opportunities may be found, we ‘cast a wide net’ in our search for asymmetric opportunities.
Risk is managed in many ways including:
Fundamental, bottom-up quantitative and qualitative research and analysis is undertaken on any company being considered for inclusion in the Portfolio to form a considered view of the investment opportunity;
Only purchasing shares in a company when the market price for those shares offers an attractive discount to our estimate of value thereby providing a margin of safety;
Avoiding companies with excessively leveraged balance sheets;
Orienting the portfolio towards cash generative businesses with sustainable business models, and avoiding businesses with sustained negative cash flows, early stage, unproven or weak business models;
Weighting individual stocks in the Portfolio appropriately, giving due consideration to the range and probabilities of outcomes;
Constructing a diverse Portfolio by avoiding excessive correlation between companies; and
The Fund not adopting any leverage or short selling strategies in respect of the Portfolio.
The Fund does not invest in any company which the Manager deems:
Is harmful to people, society, or the environment;
Is not aligned with stakeholders, especially owners of the company, either by deeds or structure.
While the risk versus reward proposition of each company in the Portfolio will differ, we believe that owning a portfolio of individually attractive companies, purchased at prices below our estimate of value, is a sound strategy for generating attractive investment returns.