Auscap Asset Management The Long and the Short of it Asset Strategy Forum October/November 2017 Auscap Asset Management Limited ACN 158 929 143 AFSL 428014 ARSN 615 542 213
Who are we? 2
Auscap Long Short Australian Equities Fund
Auscap are value investors Target: 10-15% post fee through the cycle annualised returns at the stock level* Portfolio characteristics Value based long short Australian equities manager Concentrated portfolio of 25-45 positions Typically large/mid cap and long biased Unconstrained cash balance, index agnostic Long position characteristics Target attractive low-risk total return (income + growth) opportunities Cash producing businesses with strong return on invested capital trading at attractive prices Transparent business models, with products/services that we are familiar with High ROA, stable balance sheets and quality management Short position characteristics Low quality earnings, poor or negative cash generation Complex business models and multiple assumptions required to meet growth targets Low ROIC, stressed balance sheets and inexperienced or promotional management Earnings in a downgrade cycle * This is an estimate only and contingent on matters outside the control of Auscap Asset Management and therefore may not be realised in the future. 4
Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Auscap performance* Auscap Long Short Australian Equities Fund vs All Ordinaries Accumulation Index 20 18 16 14 12 10 8 6 4 2 Auscap Fund All Ordinaries Accumulation Index JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN FYTD FY13 1.4% 0.7% 1.2% 1.5% 9.8% -4. 8.3% 19.7% FY14 4.7% 4.3% 5.8% 5.5% 2.9% 2.6% 1.3% 5.3% 0.7% 0.3% 3.8% 1.5% 46. FY15 3. 5.2% -2.1% 2.2% -0.4% 0.4% 3.7% 4.9% 4. -1.4% 4.4% -7.5% 16.8% FY16 3.5% 1.6% 4.8% 4.6% 4.7% 4.6% -3. -3.5% 3.2% -1.2% 1. -1.2% 20.1% FY17 8.5% 2.1% -2.4% -2.7% -1.8% 4. -1.2% 0.4% 2.5% -0.8% -1.5% 1.2% 8. FY18-0.8% 2.8% 2.5% 4.5% * Performance figures are calculated for the lead series net of all fees and expenses and assuming the reinvestment of all distributions. Actual performance may differ for investments made in different classes or series. Past performance is not a reliable indicator of future performance. 5
Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Auscap performance* Auscap Long Short Australian Equities Fund vs All Ordinaries Accumulation Index 12% 1 8% 6% 4% 2% -2% -4% -6% -8% -1 Auscap Fund Performance All Ordinaries Accumulation Index Performance Auscap All Ords Auscap All Ords Sharpe ratio 1.87 0.66 Avg. market positive months 2.75% 2.83% Sortino ratio 3.50 1.17 Avg. market negative months 0.19% -2.7 Annualised return 23.5% 9.7% Positive months (#) 42 37 Standard deviation pa 11.4% 11.3% Negative months (#) 16 21 * Performance figures are calculated for the lead series net of all fees and expenses and assuming the reinvestment of all distributions. Actual performance may differ for investments made in different classes or series. Past performance is not a reliable indicator of future performance. 6
Investing risks: market concentration Each market has a natural concentration, potentially creating an index bias within portfolios ASX200 Index Concentration 4 35% 3 25% MQG NAB 2 ANZ 15% 1 WBC 5% Consumer Discretionary WOW WES Consumer Staples WPL CBA CSL Energy Financials Healthcare Industrials Information Technology RIO BHP TLS Materials Real Estate Telecoms Utilities Source: Iress, Auscap 7
Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Auscap portfolio complements typical SMSF Auscap has had no significant net exposure to the top 12 ASX listed stocks over the life of the fund. Auscap SMSF 12 Exposure 3 2 1-1 -2-3 SMSF 12 Gross Long SMSF 12 Gross Short SMSF 12 Net Position SMSF 12 Average Net Position 8
Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Real Estate Telecoms Utilities ASX 200 vs SMSF 12 4 Active management: ASX200 (September 2017) vs SMSF 12 35% 3 25% 2 15% 1 5% -5% ASX200 Total ASX200 Top 12 9
Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Real Estate Telecoms Utilities ASX 200 vs Auscap 4 Active management: ASX200 (September 2017) vs Auscap 35% 3 25% 2 15% 1 5% -5% ASX200 Total Auscap Net 10
Gross & Net Expsoure Auscap performance* The fund s net exposure has averaged less than 10, its beta-adjusted net exposure has averaged less than 6. Auscap Gross & Net Exposures since inception 20 15 10 5-5 -10 Gross Long Gross Short Net Exposure Beta Adjusted Net Exposure * Past performance is not a reliable indicator of future performance. 11
Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Real Estate Telecoms Utilities Current portfolio analysis Majority of portfolio in large and mid-cap stocks Significant Longs: Selected REITs, non-bank financials and consumer companies Significant Shorts: Selected consumer discretionary and other individual companies Sector Exposure - September 2017 4 Long Short 3 2 1-1 12
Fund Summary Investment Vehicle Fund Holdings Australian domiciled registered managed investment scheme 25 45 positions FUM > $450m No. unit holders > 1000 Platform availability Minimum Investment Macquarie Wrap, BT Wrap, MLC Wrap, Ausmaq, Netwealth, Hub 24, Powerwrap, One Vue, Mason Stevens, uxchange $100,000 direct or platform minimum Commenced Date 3 rd December 2012 Management Fee (ex GST) Performance Fee (ex GST) Withdrawal Rights 1.5% of FUM [1] pa 15% of outperformance over RBA Cash Rate [2], High watermark (no reset) Monthly, with 1 month notice Bid/Ask Spread 0.2% / 0.2% Distribution Annually, following financial year end [1] Management fee payable monthly. [2] Performance Fee is calculated as 15% of the total gross return less expenses and management fees in excess of the RBA Cash Rate over the performance period, payable semi-annually for the series class and monthly for the platform class. The performance fee is subject to a high water mark with respect to previous performance. 13
Disclaimer This presentation is not a Product Disclosure Statement under the Corporations Act 2001 (Cth). The fundraising disclosure requirements of the Corporations Act 2001 (Cth) do not apply to an offer of units in the Auscap Long Short Australian Equities Fund (Fund). Information in this presentation is general information only and does not take into account a particular client s individual objectives, financial situation, needs or circumstances, nor does this presentation purport to contain all the information that a prospective investor may require in evaluating a possible investment in the Fund. A prospective investor should conduct their own independent investigation and assessment of the Fund before making any investment, including obtaining investment, legal, tax and accounting advice appropriate to their circumstances. Auscap Asset Management Limited (Auscap), its related bodies corporate and associates, directors, officers and employees do not guarantee or make any representation or warranty (whether express or implied) as to the success of the Fund, the repayment of capital invested in the Fund or any particular rate of return on investment in the Fund. Past performance of the Fund is not indicative of future performance and should not be relied upon by investors to form expectations about the future performance of the Fund. No investment in the Fund should be made without fully reviewing the information, the disclosures and the disclaimers contained in all relevant Fund documents, including in particular the Product Disclosure Statement, a copy of which is available at www.auscapam.com. Prospective and existing investors should consider the Product Disclosure Statement in deciding whether to acquire, or to continue to hold, an investment in the Fund.