Spatium fund outperforms benchmark by 53% over five years
Announcing its five-year performance figures, Spatium Capital’s Spatium Small Companies Fund (SSCF) has outperformed the ASX Small Caps benchmark by 53 per cent since FY2019.
This translates to outperformance in 16 of 20 quarters across various interest rate climates since the strategy’s inception in July 2018.
The SSCF returned 51 per cent since FY2019 compared to losses of 2 per cent by the ASX Small Ordinaries and by returns of 16 per cent by the ASX 200 over the same period.
Over the last financial year to 30 June 2023, SSCF has returned 22.2 per cent versus 5.3 per cent than its ASX Small Ordinaries benchmark.
The strategy uses a quantitative model developed by Spatium’s directors, Nicholas Quinn and Jesse Moors, over the past decade that does not take fundamental research or sector views. Instead, the factors of momentum, small capitalisation and mean reversion are considered key elements of the strategy.
“Essentially we have always been a quant manager. Our framework and rules-based approach was always quant at its centre,” said Quinn.
“We’re now leaning into this label to better capture the Australian market’s interest as to why this approach should be considered for portfolios.”
According to co-director Moors, advisers and family offices have understood the firm’s branding as a quant manager.
“They are seeing many quant funds operating in the US to produce risk-adjusted returns. They respect that it is not a black box that runs itself. We built the framework and rules over 10 years and continue to actively manage it daily,” he said.
“By looking at the market through a lens that significantly differs from its peers, Spatium Capital is able to capture outperformance with less beta and portfolio variance than the market.”
Moors notes SSCF has a 67.7 per cent downside capture ratio and upside capture ratio of 101.2 per cent.
In the lifetime of Spatium Capital’s quant strategy, it has experienced three major drawdowns, namely the fourth quarter of 2018; the COVID crisis and recovery of 2020; and calendar year 2022 when central bankers began to hike interest rates.
It holds a long-only diversified fund with an average of 25–40 stocks. But unlike other fund managers, it holds its stocks for around 30–45 days compared to peers which will hold them for months, if not years.
The quick turnover of holdings means it benefits when markets are volatile.
Moors previously told Money Management that the earlier volatility “absolutely has” been a contributing factor in its performance.
The firm’s primary motivation has always been competition, which in practice often results in better investor outcomes, according to the directors.
“By executing our investment strategy in the manner in which it was designed – no matter how emotional the market conditions may be – we know the portfolio remains well positioned to benefit.”