5th April 2016

Asset Manager of the Month

Auscap is a value-based long short manager, looking to invest in quality companies that generate substantial cash flows and have a sustainable comparative advantage when they are trading at attractive prices.

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Asset Manager of the Month

Auscap was founded by myself and former colleague Matthew Parker in 2012. Matt and I had previously worked
together managing proprietary capital for Goldman Sachs, and as such have considerable experience in and knowledge of financial markets.

The firm is focused on capital preservation before return generation. This approach is borne from both the background, experience and natural biases of the portfolio managers.

Auscap’s overall investment objective is to generate strong absolute returns with low correlation to equity markets. The firm manages one fund – the Auscap Long Short Australian Equities Fund.

The fund uses a value based approach, searching for companies that exhibit certain characteristics, including strong Return On Invested Capital (ROIC), Return on Assets (ROA) and cash flows, a sensibly geared balance sheet and businesses with a competitive advantage.

We then invest in these businesses when they occasionally trade at what we believe to be attractive prices. Typically we do not invest in early stage emerging industries, or in fields where we have a clear knowledge and/or information disadvantage compared to other industry experts or market participants.

We would rather invest in businesses that we think we understand and have typically been around for some time. We do try to keep abreast of news materially affecting the earnings of the stocks that we own given our analysis is quite data driven. We remain consistent in our investment philosophy and process, irrespective of changing industry dynamics.

Risk is controlled in the furd through retesting our hypotheses around poorly performing positions, far more time than we spend assessing positions that are acting in accordance with our expectations. In this way we manage risk by managing where we might be wrong or where the market is telling us that we are incorrect in our analysis. Ultimately the fund will experience volatility given it is exposed to equity prices which can fluctuate significantly.

However we would be disappointed if the fund did not have significantly less downside volatility than the market over time, both because of our value bias on the long investments and our ability to take short positions to protect the portfolio in the event of broad negative moves in the stock market.

Ultimately a fund manager is judged by its performance, and therefore maintaining strong returns is key. Since the fund’s inception in December 2012, the fund has achieved strong returns for its investors, annualizing 33.1% per annum, with annualized volatility of 11.3%, a Sharpe ratio of 2.40 and a Sortino ratio of 4.81.

Investor relations is also a key aspect of our work, and one we take very seriously. We think of our clients as our partners, and therefore we are keen to find like-minded investors, those who share a value based investment philosophy, so that we can build fruitful long term relationships. We try to treat our clients in the manner that we would want to be treated were the roles reversed.

In order to achieve this we always try to clearly communicate our investment approach with all current and prospective investors. We do this though our monthly newsletter, which provides us with an opportunity to both report the performance of the fund and discuss a subject that we have found interesting in our research and analysis of the market. Through the newsletter and other investor communications we hope to attract the right long term partners.

We have a high focus on our staff, as we believe that culture is critical within an organisation. When hiring staff we take the view that the type of person is more important than the resume. We look for people who share the firm’s values: personal and professional integrity; humility; an approach of treating everyone they meet with the same positive attitude and engagement; and a drive to maintain high standards of performance.

Despite striving for excellence we believe that we have a very positive culture within Auscap. We believe building culture is about hiring the right people and leading by example. If you create the right role for the individual, give them appropriate responsibility and yourself act in accordance with the firm’s stated standards, these things foster the right behaviours. The organisation, employees, service providers and clients all benefit from a strong positive culture.

Looking to the future, our vision is to create a leading funds management business that has a reputation for consistent outperformance, strong risk management, a positive culture and integrity. Ultimately Auscap’s objective is to generate long term wealth for our investors. In 2016 we hope to continue to expand our investor base with the right people, grow the firm and deliver for our investors.

Contact Details

Company: Auscap Asset Management Limited

Name: Tim Carleton

Email: [email protected]

Web Address:

 Address: Level 24, 9
Castlereagh St, Sydney, NSW 2000

Telephone: 61 2 9238

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