The Company provides investors with the opportunity to invest in a company with an actively managed portfolio of investments assembled through the application of a defined investment process and using the experience of the Manager's funds management team. The Company will predominantly invest in ASX listed securities and, where appropriate investments cannot be identified, cash. The Company will focus on absolute performance with respect to its investments.
The Company intends to manage its Portfolio with a focus on absolute returns. This may involve owning anywhere from 10 to 100 stocks.
The investment objectives of the Company are to:
- Preserve capital over most periods of time;
- Provide investors with a positive return, after fees, over most periods of time; and
- Deliver investors a regular income stream in the form of fully franked dividends
Back to top
The investment philosophy of the Company is exemplified by the following broad principles:
- The Company will seek to provide positive returns in all market conditions. It will look to do this by taking advantage of opportunities created by corporate transactions including takeovers, demergers, preference share conversions, IPO’s, placements and sell downs or other trading and arbitrage opportunities.
- The universe of potential investments for the Company will be all securities quoted on the ASX or other exchanges, bills of exchange, other negotiable investments, debentures and other permitted investments as outlined in the Prospectus dated 6 November 2007.
- The Company’s philosophy is to invest wherever opportunities are identified irrespective of whether a “micro-cap” or a “large-cap” investment is involved.
- The Company’s preference is to invest in entities where the securities are being issued or sold below the current market price or the Manager’s valuation or are the subject of a corporate event.
- The Company has flexibility to take significant positions in individual securities. This may reduce the diversity of the Portfolio and therefore increase the exposure to abnormal falls in the market price of any single investment.
- While the Company believes it may achieve acceptable diversification by owning securities in 20 different entities, the Manager will not be required to maintain this level of diversification. Rather the focus will be on absolute return for the Portfolio which may be achieved by investing in a significantly lower number of securities.
- Capital preservation is a key investment objective for the Company. Accordingly, the Company will revert to holding cash once an investment has matured and if other opportunities cannot be identified. This could lead to the Company holding up to 100% of the Portfolio in cash.
- The Company may seek to manage investment risk by taking short selling positions against its long positions or holding significant levels of cash. Short selling may be paired against a long position or may be employed when the Manager believes an entity is overvalued with deteriorating fundamentals.
- The Company may invest in securities quoted on a securities exchange located outside Australia if both the Manager and the Board considers that the reporting obligations and trading procedures applicable to that exchange are no less rigorous than those of the ASX.
Back to top
There will be no single investment strategy adopted for the Company. Rather the Manager will employ a combination of strategies to achieve the objectives of the Company.
Relevant strategies may include the following:
- Participating in initial public offerings, placements, block trades and rights issues.
- Participating in hybrid issues and convertible note issues as well as more traditional share investments.
- Focusing on merger transactions (such as takeovers, mergers, schemes of arrangements, corporate spin-offs and restructuring). By way of example, the Manager may buy securities of a target company and short sell securities of the acquiring company in an expected or announced takeover situation.
- Focusing on other corporate transactions to identify arbitrage opportunities. This may include participation in share buybacks.
- Taking advantage of arbitrage opportunities involving hybrid securities including preference shares and convertible notes.
- Buying securities in listed investment companies (LIC), where they trade at a significant discount to underlying net assets. This is known as LIC discount arbitrage.
- Relative value arbitrage (or pair trades) which combines long positions in securities with offsetting short positions to obtain returns that are independent of market movements.
- Short selling securities.
- The use of leverage where appropriate.
As the Manager will be seeking to identify trading opportunities in the market, the Manager has termed this investment process the Market Driven process. This will involve the detailed monitoring of both primary and secondary market activity with particular emphasis on new capital raisings and corporate activity.
Investments will be predominantly short term.
If an investment involves the issue or sale of securities at a discount to the current market price, no further information may be required. Other investments may require further analysis. This may involve the Manager meeting and having discussions with the potential investee’s management, discussing at length the various dynamics of the business and if necessary the corporate transaction.
Process for Market Driven Approach
The process for the Market Driven approach involves the Manager assessing the liquidity of the underlying stock. For each position we generally like to own the equivalent to one days average volume. We also have placed a 10% stop loss which means when a company's share price falls 10% below our cost price we will sell out of the position.
Back to top
The Company proposes to invest in the following investments:
- listed securities, being any security quoted on the ASX and other markets including, shares, units or notes which are redeemable, preference or deferred, fully or partly paid, with or without any right, title or interest thereto or therein (including a right to subscribe for or convert to any such security whether listed on the ASX or not), and any security of whatsoever nature which the Manager expects will be quoted on the ASX within an 18 month period from the date of investment;
- listed securities on any global stock market where the security is also listed on the ASX;
- listed securities on any global stock market where the Manager and the Board are comfortable that the reporting standards are at least equivalent to the ASX;
- discount or purchase of bills of exchange, promissory notes or other negotiable instruments accepted, drawn or endorsed by any bank, or by any corporation of at least an investment grade credit rating granted by a recognised credit rating agency in Australia;
- debentures, unsecured notes and bonds of a corporation of at least an investment grade credit rating granted by a recognised credit rating agency in Australia;
- units or other interests in cash management trusts; and
- any other financial products with which the Manager may use in the management of the Portfolio in accordance with its Australian Financial Services Licence.
Back to top