Capital preservation and strong sell discipline

This year saw the Lennox Australian Small Companies Fund, managed by Liam Donohue and James Dougherty, take out the Money Management/Lonsec Emerging Manager title.

The actively managed, style-agnostic fund that aims to identify companies with compelling medium-term valuations, and which has been nominated for the second year in a row, said it believed it did not disappoint the market this year.

The fund managers said their investment approach was based on fundamental analysis and in-depth research, and that they focus on businesses that have strong management teams, sustainable earnings profiles and favourable growth prospects.

“The team has a long and successful history of investing in Australian small and microcap funds. We are genuine long-term, disciplined investors, investing on a three-year horizon using independent research and extensive company engagement,” Donohue and Dougherty said.

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“We are focussed on capital preservation, with high hurdles for investment and a strong sell discipline.”

Speaking on their investment team’s approach, the fund managers said that Lennox’s investment philosophy and processes aimed to exploit inefficiencies in the market that lead to pricing discrepancies and investment opportunities for its clients. 

In particular, the philosophy was based on three core pillars: the qualitative attributes of a company that might influence the manager’s ability to forecast real earnings, a small number of key drivers determining a business’s success and short-term earnings expectations that were expected to be met.

“We believe our active, fundamental approach allows us to gain key insights into the companies we invest in whilst avoiding those we believe will disappoint the market,”

Commenting on the fund’s nomination, Donohue and Dougherty said: “We hope we have been nominated as a result of adding value for our investors both in the past year but also in previous years where many of our investors have been very supportive of our longer term investment approach.”

Daintree Capital’s director, Mark Mitchell, stressed that one of the biggest advantages of the nature of his fund was its significant amount of flexibility and a dynamic approach that helped generate returns from a number of different sources.

“Having that type of framework is essential to being able to add value and generate good risk adjusted returns for your clients,” he said.