Asymmetric Opportunities Fund

The Trust is a long-only, Australian equities fund managed by the Trustee-Manager with the aim of delivering strong returns over the medium to long term relative to the S&P/ASX Small Industrials Accumulation Index.

We believe smaller, less researched ASX-listed Securities are more likely to be mispriced and more likely to offer superior growth prospects. Consequently, the Portfolio predominantly consists of ASX-listed Securities which sit outside of the S&P/ASX100.

The Trust is a concentrated portfolio of the Trustee-Manager’s best ideas. The Portfolio will generally consist of twelve to twenty-five positions and aims to be fully invested with a minimal cash weighting.

The management team at the Trustee-Manager has a long history together and the Trust has a four-and-a-half-year track record of outperforming the S&P/ASX Small Industrials Accumulation Index (being the Trust’s benchmark performance index).

Our proven investment approach entails fundamental, bottom-up research and conservative valuation methods. The Portfolio is compiled by assessing the best risk-adjusted returns from our opportunity set.

We are committed to a structure which aligns the interests of the Trustee-Manager with you as Investors.

We believe this is achieved by:

• Tim McArthur and Pierre Prentice owning the Trustee-Manager;
• Tim McArthur and Pierre Prentice are unitholders and will acquire aditional units on an ongoing basis;
• a management fee that is competitive versus industry peers;
• the payment of a performance fee by the Trust to the Trustee-Manager that is dependent upon the Trust’s outperformance of its benchmark;
• any prior period underperformance by the Trust relative to its Benchmark has to be recovered before a performance fee is paid (we consider this a relative performance based high water mark);
• a cap on funds under management in the Trust (to be imposed by the Trustee-Manager in the future in its discretion) to maximise the performance and returns for Investors; and
• the Trustee-Manager's intention to undertake management activities solely in relation to the Trust (and no other funds).

“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.”

— HOWARD MARKS

The Trust invests in a portfolio of primarily ASX-listed Securities outside (but not exclusively outside) the S&P/ASX 100. The Trust generally avoids making investments (through the acquisition of Securities) into the property and resource industries.

The Trust is benchmark unaware. The Portfolio is therefore very different from the portfolio composition of the S&P/ASX Small Industrials Accumulation Index.

The Trust does not intend to engage in any short-selling practices or employ any leverage strategies. The Trustee-Manager aims for the Trust to achieve outperformance by identifying asymmetric opportunities.

Attractive asymmetric investment opportunities can be found in:

• high-quality and 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.

We respect the long-term efficiency of the ASX (and other stock markets) but experience tells us it can be an inefficient pricing mechanism in the short term. At an individual stock level, such inefficiency may be the result of:

• over-reaction to good or bad news;
• investment fads and transient themes;
• forced selling;
• program buying; and
  shorting activity (both establishing short positions and closing them).

We try to look through the causes of any short-term pricing inefficiency and focus on the inherent quality and riskiness of a company to identify any mismatch relative to its price.

Value is a function of quality and price. While even low-quality companies can present value at a price, we avoid them. High-quality companies create economic value, which over time can compensate any initial overpayment for an investment resulting from a mistaken assessment of value. 

We, therefore, have a preference for higher quality companies, ideally subject to positive trends (i.e. experiencing tailwinds rather than headwinds).

A high-level summary of the Trustee-Manager’s Investment Process is described below.

Generating investment ideas

The Trustee-Manager identifies potential investment opportunities in many ways including:

• quantitative screening of data for attributes which suggest a particular Security is underpriced;
• reviewing ASX announcements;
• monitoring news sources, publications and broker research;
• networking with fellow members of the investment community; and
• attending conferences, teleconferences, webinars and events.

Latest Performance Details.