13 Aug 2021 - Hedge Clippings | 13 August 2021

By: Australian Fund Monitors

Hedge Clippings | Friday, 13 August 2021

As we collectively grind deeper and deeper into lockdown or the threat of it (depending on your location), there's now no doubt that the only way forward is ensuring vaccinations reach a level where the majority of the population have immunity. The experts can throw out all the numbers they like, but if one thing's been proven over the past 18 months, it's that even with the best will in the world we can only be certain of being safe with the benefit of hindsight.

And of course hindsight by definition is something we never get in time - until the next time! So in the meantime there's only one thing to do: Play it safe, play by the rules, and get vaccinated as soon as you can.

Meanwhile equity markets keep on keeping on, even if only edging higher. So how do fund managers differentiate themselves when investing in what can only be described as a crowded market, or one dominated by the weight of passive investments which keep driving up markets and valuations? It's worth remembering the old saying that "a rising tide lifts all boats" but also don't forget the ebb tide which can leave the unprepared high and dry.

This week we reached out to two fund managers each taking a very different approach - from each other, and from the market in general - when looking for opportunities 'outside the square' in their investment strategy. Both have returned over 60% in the past 12 months, so they have shown an ability to provide their investors double the return of the ASX200 over the same time frame.

Vas Piperoglou and Michael Goldberg manage the Collins St. Value Fund, and it's fair to say they're not scared to back themselves in more ways than one. Not only do they invest alongside their investors, they don't charge a management fee, relying only on performance fees for their reward. In addition, they're prepared to invest in unloved assets or market sectors where their research indicates outstanding, and often hidden value.

The Collins St. Value Fund invested in Uranium as a theme some years ago - an unloved or unpopular sector if ever there was one - which helped them to a return of 60% over the past 12 months, without one negative month. Far from resting on their laurels, they're going outside the square again with a special purpose fund solely investing in the Offshore Oil Servicing Sector.

Most investors and analysts, including Hedge Clippings, might question this approach - oil not being the darling of the ESG set. But as Vas points out in this interview when we spoke with him, they've done the numbers, and they're more than happy with what they show.

Our second manager interview for the week was with Martin Pretty who manages Equitable Investors' Dragonfly Fund. Martin previously worked at well known Family Office, Thorney Investments, where he no doubt honed the art of investing in early stage, pre-IPO and small cap listed companies.

Like Vas at Collins St., Martin's Dragonfly Fund has returned over 60% in the past 12 months, where his approach is not only to invest alongside his investors in the fund, but Equitable also actively engages with the companies that the fund invests in. This can extend to taking positions on the board to assist in capital raising and capital market issues where the management and owners might not have experience or expertise.

Martin also 'takes his own medicine' or advice, by having on his own board well-known Melbourne stockbroker Hugh Roberston, and more recently by adding Paul Dwyer, founder of PSC Insurance (ASX:PSI) as both a shareholder and director.

You can watch our interview with Martin here.

Both interviews are longer than normal at over 10 minutes each, but hopefully worth listening to for different takes on how innovation in their respective investment approaches can provide an attractive return.