Tribeca Investment Partners CEO & Managing Director David Aylward & Tribeca Australian Smaller Companies Fund, Portfolio Manager & Investment Analyst, Simon Brown introduce the fund, their investment process and talk about the importance of smaller companies in a well-balanced portfolio.
Rachael Jones: Hello, I'm Rachael Jones for the Finance News Network. Joining me today from Tribeca Australian Smaller Companies Fund, are portfolio managers, David Aylward, and Simon Brown. David and Simon, welcome to FNN.
David Aylward: Thank you.
Simon Brown: Nice to meet you.
Rachael Jones: Now, first of all, David, if I could start with you, could you give us an introduction to the funds?
David Aylward: Our Smaller Companies Fund is the founding fund within Tribeca, and been running for about 22 years. In that sense, it probably represents the purest representation of the things we believe in, in Tribeca, at least the most evolved, I guess. Those things are around bottom up stock selection, so really high quality stock research, that's differentiated from the market. Then also taking a very objective look from a risk point of view, so what is the ultimate list of stocks kind of represent in terms of risks, and how do we manage those?
Then, like everything we do, a very sort of style neutral focus on it as well, and it's really run with those key elements since its inception back in '98. As I said, I've run the fund all the way through. I run it now with Simon, that's been with me for about 16 years, and he's been my co PM on this fund since 2015.
Look, we're very proud of the fund. We're very proud of the returns that it's achieved. We've done about a little bit over 11% [sic: "per annum"] since inception, and that's about twice the underlying small ordinaries index. That was our target when we set out, and we've done that with relatively low volatility. So in a nutshell, that's the fund and that's why we're very proud of it.
Rachael Jones: Excellent. Thanks, David. And over to you, Simon, what makes the fund stand out against other funds in the small-cap space?
Simon Brown: Our process is structured and designed to know the risks that we need to take to achieve our alpha outcomes. This is implemented by a team who has a lot of experience, time in the saddle, if you like. We also take a very sophisticated approach to portfolio management. When you put a group of stocks together, you're going to have risks. You're going to have biases that may be intended or unintended. We like to know what those are so we can let the underlying stock performance shine through as much as possible.
Rachael Jones: Thanks Simon. And over to you, David, where has the fund made money this year?
David Aylward: Yeah, it's been a crazy year, as you can imagine. Lots of ups and downs and starts and stops. Really we've had to move with that, and we've made money in everything from internet retail stocks, to basic materials companies, in about three different phases through that one year.
Simon Brown: We identified the area of agriculture and food as being particularly a good value, coming towards the end of a particularly nasty drought, where we saw earnings being shielded to a large degree, mid cycle earnings by the elongated drought. That proved to be the case once the drought broke, and so that delivered excellent alpha, and was particularly uncorrelated during the COVID related draw down.
Across the material space where we have unrivaled research capability at Tribeca, we identified two names in the gold space being Saracen (ASX:SAR) and Northern Star (ASX:NST) , which had done incredibly well for the fund, both having very strong management capability and a very deep asset basis. As well as the gold space, we also had an emerging nickel miner called Nickel Mines (ASX:NIC), which we identified very early on, that's now risen up to become a global player in the nickel space, both in terms of production and in terms of costs being on the lowest end of the spectrum.
Yeah, it's been a good year. We've also, as David mentioned, made some inroads across sort of Supercheap Auto (ASX:SUL) and Temple & Webster (ASX:TPW) in that lockdown related boon that benefited many stocks.
Rachel Jones: Thanks, Simon. David, what is the outlook and what other opportunities do you see?
David Aylward: Yeah, we're pretty bullish going forward. In response to this global pandemic, governments throwing a lot of stimulus at the issue, globally, and I think that will prompt pretty big earnings recovery, based on the year that we've just completed. With that in mind and very sort of liquid markets, I suspect that equities continue to do well. So we're fairly overall bullish.
I think there are a few slices of the market that could do particularly well over the next few years, I think as a result of the way we're responding to this crisis. To me, the one that keeps playing out for mine is this issue of real assets. So, governments are essentially printing money, one way or another, and there's a lot of stimulus in the market. To me, that is either inflationary or at the very least, not particularly constructive for currencies.
You want to own real assets, and so that's one of the things that's really guiding us into the year ahead, is thinking about things like commodities, hard assets, like some sort of infrastructure assets that are yielding or property assets. So we'll do our normal thing of picking winners and losers in each sector, but as a guiding principle, I think that's going to be very important over the next year.
Simon Brown: On the infrastructure theme, Uniti Group (ASX:UWL) is the name we really like. It's put together some great infrastructure assets in the Telco space, in particular fiber to the home, on new Greenfield developments and multi-res. We feel there's a long runway for growth there, as new developments come on and move into their portfolio.
Also, we're looking at names that are going to cycle periods that were heavily disrupted by the COVID pandemic. One of those is PWR Holdings (ASX:PWH), which we really like, supplies high-end motor sport, which you obviously know races in F1, were curtailed through the year and canceled. So a level of normality will bring more races for those guys and a greater level of business, which we expect to bounce back in that price.
Rachael Jones: Thanks Simon, and back to you, David, again. Just to the last question now, how can people invest?
David Aylward: So in the retail space, we partner with GSFM. They distribute for us, so it's on their website that you can find the fund. So ww.gsfm.com.au, and look for the Tribeca Australian Smaller Companies Fund and follow the prompts through there. For institutional investors, just contact us at Tribeca.
Rachael Jones: David Aylwood and Simon Brown. Thanks so much for the introduction today, and I'll look forward to speaking to you in the first half reporting season.
David Aylward: Thank you.
Simon Brown: Thank you.