Antares High Growth Shares Fund Portfolio Manager Richard Dixon talks about the fund's approach that has delivered long-term outperformance for investors and strong reporting season results.
Stephen Barbarich: My name's Stephen Barbarich. I'm a research manager at NAB Asset Management, and today I'm joined by Richard Dixon, the portfolio manager for the High Growth Shares Fund. Thanks for your time today, Richard.
Richard Dixon: Thanks Stephen.
Stephen Barbarich: Richard, you're the portfolio manager for the High Growth Shares Fund. Can you tell us a little bit about the Fund?
Richard Dixon: Yeah, the Antares High Growth Shares Fund is a long/short Australian equities fund that aims to significantly outperform the market over the medium to long term by employing three key strategies. So short selling up to 25 per cent of the value of the Fund. Reinvesting those into what we call enhanced long positions, or larger overweight positions, into stocks that we like. And then active trading is the third strategy.
The Fund has a very long track record over spanning nearly two decades. I've been the lead manager for around 12 years and I've been on the Fund for about 17. So you know a large proportion of the time of the Fund and the track record is very strong, achieving an investment of $100,000 in the Fund back in December 1999 at inception would be worth $700,000 after all fees, versus the benchmark over that same time period the ASX accumulation, the ASX 200 accumulation index of about a bit over $400,000. So a very, very significant outperformance over a long period.
We employ primarily a bottom up research process and what we say is our style agnostic, so we're not wedded to either just value or just growth stocks. And we're really aiming to provide consistent performance and outperforming different market conditions.
Stephen Barbarich: Given the bottom up research process, how have you kind of seen the recent surge in volatility in markets?
Richard Dixon: Yes, well after a very stable period really and through much of 2017 in particular, we saw I guess a virtually synchronized local growth which was very conducive to markets sort of steadily rising, and extremely low volatility, almost the lowest on record. And that changed quite dramatically as we... earlier this year so early February, there was a couple of catalysts for that that sort of broke the complacency the markets had had. We saw some stronger than expected wages growth which fueled some inflation concerns in the US and fears that interest rates would be needed to increase quicker than previously expected. We also saw a bit of a worrying trend towards I guess trade wars between particularly the US and China, and certain industries like steel and aluminum where there was a tit for tat between the US and China over trade wars which sort of derailed things a bit.
And really it took a knock to the market, so we saw a bit of weakness and the market corrected quite hard. We sort of view those periods as good opportunities particularly for an actively managed long/short fund such as ours. We have a lot of levers and tools at our disposal to outperform in different conditions. And we took advantage of some of those opportunities through that period. So despite all the uncertainty, we saw earnings both in the US and in Australia remained quite robust and quite intact. So yeah, we viewed it as some good opportunities for the Fund.
Stephen Barbarich: Yeah, and following on from that, with the recently concluded reporting season, what kind of changes or what kind of portfolio activity's been happening?
Richard Dixon: Yes, well it was another quite reporting season in Australia in February, and then followed more recently with the US reporting season has been quite strong as well. Both countries have seen a lot more stocks beat expectations than miss expectations. And certainly in Australia, a feature has been very robust balance sheets as well which has led to capital management, so buybacks, high dividends and the like which has underpinned some markets to a degree. And has really helped seen markets recover quite strongly from that weakness in February that was more macro factors as they focused more on the bottom up fundamentals which are quite sound, we've seen markets recover quite strongly through March and April.
So yeah, they were some of the key things. They were obviously higher energy costs in particular were a bit of a headwind for some industries, so particularly those I guess energy intensive companies so whether it's building, construction, some mining, big users of energy were a bit impacted and manufacturers and the like. So that was a notable headwind, but yeah generally it was a pretty good reporting season again, and pleasingly on the Fund. We had our probably fourth or fifth strong reporting season in a row over the last couple of years. And really that was I guess being well-positioned in a few stocks that beat expectations, so some enhanced long positions that we had in stocks like Computershare (ASX:CPU), Qantas (ASX:QAN), CSL (ASX:CSL) and Resmed (ASX:RMD) were some that come to mind, that all beat expectations and delivered strong alpha to the Fund. So yeah, it was a pleasing period for us.
Stephen Barbarich: Thank you Richard. That's been a great recap of certainly the Fund in the market and I appreciate your time today.
Richard Dixon: Thanks for your time.