Fundamental research is the key to the success of Smallco Investment Manager’s Investment fund, according to the company’s managing director, Rob Hopkins.
Smallco took out first place in the Australian Equities Long Short category this year.
Lonsec noted the fund’s strong and highly experienced four-person investment team (Hopkins, Bill Ryan, Andrew Hokin and Craig Miller) when choosing the manager.
“The people who are in the fund have all come out of a broking research background, so we spend a lot of time doing fundamental research, very strong fundamentally driven research,” Hopkins said.
Hopkins said the fund recorded 60 per cent returns to investors over 12 months to the end of March, an “impressive result” for a long short fund.
“As the name implies, the focus of the fund tends to be more on the smaller companies end of the market, so our target market is $100 million — $500 million market capitalisation,” Hopkins said.
“It’s the smallest part of the market that is reasonably accessible by institutional funds, in that it’s
still quite liquid, but [it] offers potentially a lot of upside.”
Many of the companies the fund researches have monopolised the market, as well as already having strong earnings growth and high returns on their funds employed, Hopkins said.
Internet stocks, financial services, and IT were the major focuses of the fund, he said.
Richard Dixon, senior investment manager at Aviva Investors, said the long pedigree of the High Growth Shares Fund was one of the reasons Aviva was a finalist for two consecutive years.
“It’s one of the longest running in the market, so [it has] a long track record and experience in different market conditions, and [it’s] also a fund that’s exceeded its performance objectives over long periods of time,” he said.
The fund has been ‘highly recommended’ by Lonsec for six years in a row. It was launched in 2001.
“We’ve had very strong performance in the last three years, in some of the more unusual market conditions we’ve had in a very long time,” Dixon said.
Finalist K2 Asset Management delivered good returns to investors in its Australian Absolute Return fund in strong markets as well as in extreme conditions such as the financial crisis.
Its long short funds helped it preserve capital in a negative market as well as produce consistent positive returns. The fund returned 1.9 per cent in the 2008-09 financial year, compared to negative 22 per cent on the All Ordinaries Index.
