Lee Hopperton, Auscap; Justin Tay, Zenith. Photo: Matt Fatches
Category: Australian equities – alternative strategies (incl long/short, income overlay (options))
Winner: Auscap Asset Management
Analyst: Justin Tay
Sector overview:
The Australian equities – alternative strategies sector encompasses long/short active extension and variable beta, and income overlay (options) strategies. In addition to traditional stock selection, long/short managers have the ability to generate excess returns through adjusting their net equity exposure, capturing relative value anomalies across stocks/sectors and actively allocating to cash. Managers who delivered outperformance over the past 12 months correctly navigated the large sector and stock rotations through the year.
Zenith says …
The Auscap Long Short Australian Equities Fund is a variable beta Australian equity long/short fund managed by Sydney-based Auscap Asset Management (Auscap). The investment team consists of experienced co-portfolio managers, Tim Carleton and Matthew Parker, both of whom are held in high regard by Zenith. Zenith notes that Auscap is conservative and measured in its investment approach, which we believe is conducive for the management of an absolute return/variable beta strategy. The fund has produced very strong excess returns relative to the Australian equity market index and cash over all longer-term rolling periods and since inception.
Interview
Lee Hopperton
Distribution manager
Auscap Asset Management
We’ve stuck very strictly to our value-driven discipline. We’re firm believers that companies with strong cash flow, good management and solid track records will deliver us a low-risk 10 to 15 per cent return; and we’ve made a number of those decisions over the past four years that have driven our returns. We don’t disclose individual stock positions. We’re unconstrained in the amount of cash that we can own. Earlier this year we were holding 50 per cent cash for the first six months of the year. We invest only based on the opportunity set that we see – so 50 per cent cash tells you we are not seeing a lot of opportunities; and it also tells you that we’re very focused on capital protection and managing risk. We never know where the opportunities are coming from so, as I said, for the first half of this year we didn’t see many opportunities. Then mid-year there was the Brexit vote, and we didn’t see it coming but it threw up a whole load of opportunities, and because we were holding cash it gave us a great opportunity to invest. So it’s very difficult to predict where the opportunities will come from. We just hold positions until we don’t think there is value there any more; and we can be unconstrained, so it’s not inconceivable that we can hold large cash balances. But typically the fund has been fairly heavily invested over its life.
