Australian Equities (Broad Cap)
Winner
Macquarie High Conviction Fund
Finalists
Smallco Broadcap Fund
WaveStone Wholesale Australian Share Fund
The Macquarie High Conviction Fund managers view every company as a potential investment opportunity and do not constrain themselves to value or growth investment biases.
This open-minded approach and closely monitoring companies until they can meet or beat the market’s expectations so stocks reached fair value saw the fund beat its peers.
Head of equities at Macquarie Investment Management, Patrick Hodgens, said his team focused on future yield opportunities and sought companies with predictable increasing cash flows, and decreasing capital expenditure, along with a commitment from management to release excess cash flows as dividends when the business was cash flow-positive.
“Identifying a company with future yield characteristics could provide access to a yield stock of tomorrow, without the yield premium. We think it is a better way to access yield in the current market environment,” Hodgens said.
Finalist, SmallCo, has always been materially underweight in resources and energy as do not provide the firm with capital intensity and cash generation or meet the firm’s filter of being able to be confident in their earnings forecast.
Portfolio manager Andrew Hokin, attributed his fund’s success to being always to seeking quality businesses that generate higher returns on funds employed.
“Where that tends to leave us is in our preferred sectors like Internet stocks, financial services companies (I’m talking about the diversified financials rather than the banks), software and IT businesses and healthcare,” Hokin said.
Following the principle of sustainable competitive advantage and maintain a high conviction, active, bottom-up stock picking strategy saw Wavestone Wholesale Australian Share Fund qualify as a finalist in the category.
Principal, Catherine Allfrey, said with resources and banks constitution around 50 per cent of the market, it paid off to play in the other 50 per cent of the market and achieve double digit returns.
“Our style is quality class investing and I think if you think about the market conditions last year, it really suited an active, bottom-up stock picker,” she said.
