L1 Capital has won the award for Innovation at Money Management’s Fund Manager of the Year awards in Sydney on 22 June.
Speaking to Money Management, portfolio manager James Hawkins discussed the firm’s high-conviction L1 Capital Catalyst Fund and the three beliefs that shape the business.
Managed by a three-person Catalyst Investment Committee comprising Hawkins and L1 Capital founders, Mark Landau and Rafi Lamm, the Fund was first launched two years ago so is relatively new to the Australian marketplace but has successfully grown funds under management to $1.4 billion.
The Catalyst Fund is described as a “best ideas fund with an activist overlay focused on unlocking value in Australian companies by taking a hands-on ‘owner’s mindset’ to each investment in a tightly focused portfolio of up to 10 companies”.
The firm also runs four other investment strategies; long short Australian equities, international equities, UK residential property and a multi-strategy hedge fund.
Hawkins said there are three beliefs that grounded the Fund when the team were considering launching it.
“First, that a well-executed activist strategy could deliver superior returns for investors over a multi-year time horizon. Second, that L1 Capital was well-placed to deliver this strategy given our experience, capabilities, relationships and scale, in a way that would create value for investors. And finally, we felt there was a gap in the market, with few activist investors in the Australian market relative to international markets.
“The activist approach looks to unlock value in some of our most compelling investment ideas through ongoing engagement with management and company boards and we believe this approach is under-represented in Australia relative to international markets.”
Hawkins said the L1 Capital Catalyst Fund uses a full range of techniques from behind-the-scenes engagement to public initiatives and has a particular focus on enhancing corporate governance and protecting shareholder interests.
As for how the Fund is positioned for the next 12 months and the firm’s plans, Hawkins said he expects markets to remain volatile amid higher interest rates and a weakening consumer. However, he is positive this will create stockpicking opportunities for the Fund.
“Against this backdrop, investors remain very risk-averse and crowded into a narrow segment of the market that includes so-called ‘defensive’ stocks as well as large-cap growth and technology names, driving up valuations to historic highs for some of these names. In addition, the market is discounting quality companies that might be in a challenging part of the economic cycle or are not optimising their existing assets in this environment.”
“We are contrarian investors at heart, and typically buy stocks in the value end of the market. As a result, we see a good set of opportunities in the current environment that meet our investment criteria of value, quality and having a realisable catalyst,” he concluded.
