Quest Australian Equities Ex-20 Portfolio SMA

Quest Asset Partners was formed in 2004 to create an independent boutique Australian equities manager that was motivated by performance and not by size. The firm manages in excess of AUD$2 billion for institutional, wholesale and wealth management clients. Quest is 100% privately owned by the investment team who have built a long standing and sophisticated 3 Stage investment process that dictates stock decisions and shapes portfolio construction. All staff are co-invested in the portfolios alongside clients. Quest has a long-standing track record with a recognised skill in analysing and investing, particularly in small and mid-cap stocks. The business adheres to strict compliance guidelines and embeds an understanding of sustainability into the investment process.

The Quest team believe they have a number of competitive advantages:

• Independently owned;
• A long track record of 18 years;
• Lack of staff turnover in the investment team thereby retaining intellectual property;
• In depth research that pinpoints the key drivers of performance and determines our target price. We believe accurate business assessment requires a combination of skills and that stock research is a mix of both art and science;
• A strong understanding of the business value chain;
• A process that continually reviews the quality ranking and valuation assumptions for each business;
• Access and capacity to interview senior management of investee companies and competitors;
• Willingness to undertake travel to differentiate business knowledge including finding similar business models in other markets;
• A nimble team that undertakes detailed peer review of business valuations; and
• A bespoke valuation template that allows sensitivity analysis.

Quest Asset Partners Pty Ltd holds a wholesale Australian Financial Services Licence from ASIC (AFSL Licence No. 279207).

As the holder of a wholesale AFSL licence, those who satisfy ASIC’s ‘Sophisticated’ or ‘Professional’ Investor requirements can come directly to Quest. Both the Quest Ex20 Trust and Quest Long Short Trust have an external Responsible Entity and are accessible for ‘Retail’ investors via Equity Trustees.

• QuestLong Short PDS from Equity Trustees: Link to Quest LongShort PDS
• QuestX20 PDS from Equity Trustees: Link to Quest X20 PDS

Quest SMA portfolios are available on investment platforms including Macquarie, JBWere, Mason Stevens, MyNorth, Netwealth, HUB24 and Xplore Wealth. Retail investors can access the SMA portfolios via their financial adviser.

Quest provides four Australian equity portfolios run by various members of the experienced team. All Quest portfolios utilise the long standing Quest investment philosophy of combining business quality and value disciplines. To satisfy ASIC requirements, some portfolios are available directly from Quest whilst others are accessed via financial planners, investment platforms and/or the Responsible Entity of our investment trusts.

The following table provides a table of accessibility.

Institutional Investors sign an Individually Managed Account (IMA) agreement directly with Quest which can be tailored to suit specific needs. Quest uses Link Fund Services (LFS) for back-office functions and Institutions elect the custodian. Please contact Quest for more information.

Quest Portfolios have ratings from various independent manager researchers, such as JANA, Willis Towers Watson, Lonsec and Zenith.

The current Lonsec ratings are (as at November 2022):

• Quest Concentrated - Recommended / 4 Stars
• Quest Ex20 - Recommended / 4 Stars
• Quest Long Short - Recommended / 4 Stars

Financial advisers can email quest@questap.com.au for the Lonsec and Zenith reports.

This depends on the product. The Trusts pay annual distributions. The SMA’s reinvest all income and realised gains. A client can redeem all or part of their investment at any time. Redemptions are usually settled in 2 days.

The Quest Long Short and X20 Funds have a minimum of $50,000. Please see your financial adviser to invest with Quest on Mason Stevens, Macquarie, HUB24, Netwealth, Xplore Wealth and MyNorth. The minimum investments are set by the platforms. For clients on the JBWere Multi-Asset Platform (Sophisticated Investors) the minimum investment is $250,000. Some minimums can be varied by agreement. Please contact Quest.

All portfolios have the objective of adding value after fees over the relevant portfolio benchmark over the medium term.

Portfolios have both Quest Investment Management fees and platform or trust fees depending on the investment structure. Please see the details in the particular PDS or platform documents.

Quest portfolios generally carry management fees and performance fees. Performance fees are paid when portfolios perform well. Most portfolios have performance fees on outperformance above a benchmark such as the S&P/ASX300 Accumulation Index whilst one portfolio has performance fees on returns above an absolute hurdle. All mandates with performance fees have high water marks for the benefit of clients where underperformance must be recouped before performance fees can be earnt.

Quest Directors have considerable experience managing large portfolios. Quest has chosen to remain a smaller boutique to ensure size is not an impediment to client returns. We have chosen a performance fee model to offset the smaller scale.

A central tenet of the Quest Asset Partners investment process is the assessment of business quality. We are attracted to companies that can demonstrate an ability to attain and sustain above average returns on capital employed. In our experience, companies that can maintain high returns on capital are rare and can become valuable. Consideration of Environmental, Social and Governance (“ESG”) factors are important inputs into our qualitative assessment of business quality. It may also impact our valuation of a company, reflecting our evaluation of the risks inherent in each business.

Quest philosophy is to provide ‘best ideas’ portfolios. We limit the stock numbers in each portfolio in order to maximise both the quality of holdings and the weights held in each stock. In this way we seek to maximise potential returns.

Our Concentrated mandate limits holdings to no more than 35 securities will be held in a portfolio and historically clients have held approximately 30 stocks. The Quest Ex20 has a 40 stock limit whilst the Long Short has a higher limit. A Quest portfolio will be more volatile than the relevant Australian equity index with the potential to deliver larger absolute gains or losses.

Prior to the launch of the Quest Long Short Fund in February 2020, Quest did not short sell stocks. The Quest Long Short Fund is classified as a 130/30 active extension strategy. Up to 30% of the portfolio can be shorted and reinvested in alternative long investments. In November 2022 the Long Short is 5% of Quest’s FUM, so shorting is currently a small activity at Quest.

Some Quest portfolios are available as SMA’s on various investment platforms such as Hub24 and Macquarie. Investors invest into a Separately Managed Account (SMA). This structure allows Quest clients to have their own individual portfolio that replicates a model portfolio. As a result, all clients have the same portfolio of shares. The shares are held in the name of the applicable custodian on behalf of our clients.

In contrast to pooled investment vehicles or unit trusts, investors retain individual ownership of the underlying investments managed by Quest and there is no transfer of capital gains between clients. This may allow clients to benefit from the tax advantages from discounted CGT benefits.

Only institutional mandates and the Quest Long Short allow for use of derivatives. In practice, derivatives are seldom used except to manage large client flows.

If you have any questions, please contact Quest on 02 94092333 or email quest@questap.com.au