Asset gathering for the sake of it by active managers is ‘where the industry has gone wrong’, according to boutique manager Ophir’s chief executive George Chirakis.
The firm runs a High Conviction and an Opportunities fund which both invest in small-cap equities and were both closed for new investment. The High Conviction strategy invested in both small and mid-cap equities and was concentrated with only 15-20 stocks while the Opportunities fund invested in small caps only and held between 30-50 stocks.
The small-cap fund was closed at $400 million while the small/mid-cap fund was closed at $750 million.
Chirakis said this was done to preserve the liquidity and positive performance of the funds.
All Ophir staff must exclusively invest in the two funds, at the expense of holding outside stocks, which gave them ‘skin in the game’ and reduced possible conflicts of interest.
“We don’t want to have billions in assets under management, we want to make our clients money through positive performance rather than from accumulating assets.
“That’s where the active management industry has gone wrong, they are charging active fees but only delivering index-type returns. This is why passive funds are winning the battle.
“We only pick those stocks where we think we have an edge and ability to predict earnings.”
Stock winners for the funds had included payment firm AfterPay and A2 Milk, with the company particularly targeting those which were growing their companies offshore.
This was reflected in the performance with the Ophir Opportunities fund having returned 13.4% over one year to 30 August, 2019, according to FE Analytics, versus returns of 2.4% by the ACS Equity-Australia Small/Mid Cap sector.
The High Conviction fund, which is now $554 million, was changed from an open-ended fund to a closed-ended investment trust last year when it listed on the Australian Securities Exchange. Chirakis said this move meant the company was better able to manage inflows and outflows from new and existing investors.