Mark Arnold

Hyperion Asset Management (Hyperion) has today announced that it has neutralised its net climate impact by offsetting its historical emission since its inception in 1996.

The announcement is the latest step in the equity manager’s “carbon light” approach and commitment to cutting global emissions.

Commenting on the announcement, Hyperion’s Managing Director and Chief Investment Officer Mark Arnold said that reducing and neutralising carbon emissions was of paramount importance and that the asset manager had partnered with environmental consultancy South Pole to assist in this process.

“In our view, the single biggest structural headwind to the global economy and everyone’s general quality of life is the negative and worsening effects of climate change. Our portfolios are extremely carbon light, but we wanted to also ensure that Hyperion’s carbon footprint was being offset to minimize the negative net impact our business activities are making on the climate and the environment.”

“We believe that investors with direct and material exposures to fossil fuel-based energy businesses will underperform. This underperformance will occur because they will be disrupted by renewable energy generation and storage systems and electric vehicles. In the long-term these companies will be forced to internalise environmental costs relating to climate change that they have historically externalised.”

“Looking ahead, we expect economic growth to remain lower for longer and believe that the role of fossil-fuel based businesses will substantially diminish over the next decade. Long-term investors who fail to recognise the economic imperative to decarbonise their portfolios will do so to their own detriment,” he added.

Hyperion, which currently manages $8.6 billion across three strategies, engaged South Pole to assist in the planning and implementation of its carbon credit strategy which has seen it achieve South Pole’s ‘Climate Conscious’ label. The program with South Pole contributes to various initiatives both in Australia and abroad including EcoAustralia Biodiverse Tree Planting project, which aims to plant one million trees across Australia.

Jason Orthman, Hyperion’s Deputy Chief Investment Officer said: “Sustainability has been core to Hyperion’s investment philosophy and process since it was established. Our portfolios are made up of disruptive, high-quality, and innovative companies with sustainable competitive advantages. When you look at the amount of carbon which is produced by the companies we own, it is a small fraction of their relevant benchmarks.

“We believe that good investment returns are interlinked with sustainability and environmental outcomes and as cheaper renewable energy options continue to become commercially viable, carbon-intensive businesses will struggle to compete with those that are “carbon light” in the decade ahead.

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Mark Arnold

According to recent Morningstar reports, Hyperion Asset Management’s (Hyperion) funds have returned market topping performances both over the last two decades and in recent months, despite market volatility and a poor end to FY2020 for the ASX. 

Hyperion’s Australian Growth Companies Fund has been named the top performing non-geared fund over the 20-year period to 30 June 2020, outperforming 521 other large cap Australian equity funds^[1]. The report, based on the Morningstar Direct Global Fund Manager database, shows that the Fund’s unit trust delivered an average annualised return of 9.80 per cent after fees over the two-decade period.

The Hyperion Broad-Cap Equities Composite delivered an average annual return of 10.6 per cent after fees during the 20-year period to 30 June 2020. The fund has been managed by Hyperion since September 2002.

The Fund was the nation’s best performing large cap Australian equity fund* for the 20 years to May 31 2020, according to the Morningstar Global Fund Manager database.

But despite adverse market conditions, Hyperion has managed to keep its significant lead more recently as well. Its Global Growth Companies Fund delivered a return of 14 per cent after fees from 1 Jan to 30 June 2020, outperforming Morningstar’s World Large Growth category by 10.21 per cent, while the Australian Growth Companies Fund and Small Growth Companies Fund not only still topped the Equity Australia Large growth and Equity Australia Mid/small Growth categories respectively over the same period, but were the only funds not to deliver a negative return.

The Small Growth Companies Fund was also the top performing small-cap fund of the decade to Dec 31 2019 according to Mercer’s 10-yr fund manager performance survey.

Outside of Australia, Hyperion’s Global Growth Companies Fund is also the best performing fund out of 70 Morningstar Equity World Large Growth category over a five-year period, as at 30 June 2020.

An approach that continues to deliver

Managing Director and Chief Investment Officer, Mark Arnold said, “Our performance demonstrates that it is possible to take a long-term view and deliver short-term results with the same fund, growing our investors money through lean times and bountiful. We design our portfolios in a way that allows us to consistently profit from market highs as well as to protect capital during periods of market volatility. Our results prove that you do not need to use complex hedging strategies and derivative products to protect your capital during downside movements.” 

The data compiled by SPIVA in the Australia scorecard reveals that over the 10 and 15-year periods, 83.9% and 85.30% of Australian equity general funds underperformed the S&P/ASX 200 on an absolute basis respectively.^[2] The findings demonstrate that Hyperion is one of a very small group of managers able to consistently outperform over the short and long term.

Mr Arnold credits Hyperion’s consistent results to its strict proprietary investment process which allows the team to separate the winners from the losers.

“Going forward we believe it will be more crucial than ever to identify the winners as they become fewer and further between. COVID-19 has further pushed the global economy into a period of low growth and we think that only a select group of companies will be able to continue to grow in this challenging environment. We see this growth stemming from their ability to innovate and take market share from their competitors.

“We invest with the mindset of long-term business owners and evaluate not only the quantitative side but also the less tangible qualities including company culture, leadership team and investment in research and development.”

Disruption and innovation for returns

Jason Orthman, Deputy Chief Investment Officer, added that Hyperion’s focus on disruptive and innovative companies has had a large impact on the manager’s success over the past two decades. 

“We back these new-world companies that are challenging the status-quo and shaking up entire industries. These are businesses which consistently demonstrate that they can thrive in the disrupted world we live in. We think that many old-world companies’ business models are fundamentally challenged and with the overall economic pie no longer growing, earnings growth will come under increasing pressure and especially as they lose market share to disruptive newcomers. 

“We have been watching the electric and autonomous vehicle space for many years now and see that as one area which will have a big impact on transport in the future,” Mr Orthman added.

 ———

[1] Luk, P. & Gupta, A. (2019) SPIVA Australia Scorecard. Available at https://www.spglobal.com/spdji/en/documents/spiva/spiva-australia-mid-year-2019.pdf.
[2] The large cap Australian equity funds report sourced from Morningstar Direct includes the following Morningstar categories: Equity Australia Large Value, Equity Australia Large Growth, Equity Australia Large Blend and Equity Australia Large Geared

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Mark Arnold

Hyperion Asset Management’s Global Growth Companies B Fund has topped a table of 295 Equity World large cap funds as per the data from the Morningstar Direct Global Fund Manager database, which reports that the Hyperion Global Growth Companies Fund B delivered a total annualised return of 18.34 per cent over the five year period (ending 30/04/20).

The next best performing fund returned 14.81 per cent (or 3.53 per cent less) and the median return of all funds delivered 7.39 per cent (or 10.9 per cent less).

Commenting on the news, Managing Director and Chief Investment Officer, Mark Arnold, credited the top ranking to Hyperion’s strict proprietary  process which allows it to separate the highest quality companies from the average: “Some of the factors we look for in a company are a strong value proposition, a highly committed management team that has skin in the game, good investment in R&D and new tech and strong balance sheets.

These are companies which we believe will continue to grow and deliver for our investors. And while some people may consider growth stocks to be expensive, investing in them doesn’t mean overpaying.”

Mr Arnold went on to say while the intense market volatility sparked by COVID-19 is a short term issue, he expects that the economic recovery from this period will be difficult and will be hindered by pre-pandemic headwinds including high debt levels, rising wealth inequality, ageing populations and disruption coming from  technology and climate change.

“We are currently in an economic environment of stagnation where most companies will experience lower earnings and lower growth and we expect this period will last many years. With the economic pie not growing, companies will need to secure more market share in order to prosper.”

Jason Orthman, Deputy Chief Investment Officer added that Hyperion’s approach is based on the team being forward looking but patient: “We have taken advantage of the market drop to purchase shares in some companies which we had liked but considered overpriced at the time.

We are laser focused on protecting and growing our investors’ capital over the long term by investing in companies which continue to perform in all market conditions. We believe that this result is a testament to that goal.”

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Commenting on the award win, Managing Director and Chief Investment Officer Mark Arnold said: “We developed Hyperion Asset Management’s bottom up, structural growth focused investment process over two decades ago. While some may not find it exciting, we have consistently applied our rigorous standards to our investment decisions across our domestic and global equities products and as a result we have delivered substantial excess returns for our clients since the business was established in 1996.

“We are a research driven business that has always taken a long-term view and invested as business owners, rather than as short-term share traders. We continue to focus on delivering long-term outperformance for our clients, and delivering for our clients over the long-term is what we find exciting,” said Mr. Arnold.

He went on to say, “Hyperion’s proprietary investment process is what allows us to identify high-quality businesses with clear and sustainable competitive advantages that are well-positioned to outperform in the long term.”

Hyperion Asset Management beat out Greencape Capital and Platypus Asset Management to claim the title.

Hyperion Asset Management has won the Domestic Equities Small Caps category four times prior and the Domestic Equities Large Caps category twice in previous years.

Jason Orthman, Deputy Chief Investment Officer added that Hyperion’s long-term focus is a vital ingredient of their success.

“We always take the long-term view rather than be distracted by short-term noise. It allows us to uncover the innovative and high-quality structural earners who are able to take market share in all sorts of environments, including economic downturns. As we head into an extended period of economic deterioration in the next five to ten years, this is ultimately what will allow Hyperion Asset Management to continue to deliver attractive returns for our investors.”

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Mark Arnold, Chief Investment Officer at Hyperion said the “Highly Recommended” rating from Lonsec is a tick of approval for Hyperion’s disciplined, well developed and repeatable investment process as well as the high calibre and long tenure of the investment team.

“The fact that Lonsec has given our Global Growth Companies Fund a “Highly Recommended” rating is evidence of the consistent quality of our rigorous bottom-up investment approach, which focuses on identifying high-quality companies which will produce long-term, sustainable returns for our clients.

“The Global Growth Companies Fund is available to advisers on Macquarie Wrap, BT Panorama, BT Wrap, Asgard, Hub24, mFund and Netwealth.”

In its report, Lonsec praised Hyperion for its strong investment research culture and well-developed bottom-up research process that is repeatable and robust.

Lonsec notes Hyperion’s investment style is well suited to a global investment universe, as the larger opportunity set in global equities allows Hyperion to set a high bar when it comes to identifying quality businesses and to exercise rigid discipline in terms of valuation.

Hyperion’s Deputy Chief Investment Officer, Jason Orthman, said that Lonsec’s rating is the highest-possible endorsement of the quality of Hyperion’s investment team and investment process.

“Our portfolio is made up of disruptive and creative companies – those that have strong value propositions, a sustainable competitive advantage and the ability to significantly increase earnings over the next decade,” he said.

“Hyperion’s Australian equities funds have outperformed the market consistently in the 22 years we have been investing, and we see no reason we won’t continue to achieve the same outperformance in global equities.

“In fact, we are confident that our investment team and robust investment process will continue to produce strong returns from equity portfolios, both here and overseas,” Mr Orthman said.

The Hyperion Global Growth Companies Fund was the top performing Global Equity Fund of 2018 in both the Morningstar and Mercer surveys, delivering investors 17.8% p.a. return (after fees) over the past four years, generating 6.7. p.a. above the fund’s benchmark, the MSCI World Accumulation Index (AUD), as at 31 December 2018.

The Hyperion Global Growth Companies Fund also received a “Recommended” rating by Zenith Investment Partners on 30 November 2017.

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Tim Samway

Award-winning, high-conviction equities fund manager, Hyperion Asset Management (Hyperion), has announced the Hyperion Global Growth Companies Fund has been added to the Macquarie Wrap platform.

The Hyperion Global Growth Companies Fund is run by Hyperion’s long-standing investment team, applying the same proven philosophy and process which has produced consistently strong returns from their Australian equity portfolios for the past 22 years.

Hyperion’s Managing Director, Tim Samway, said: “We’ve received a significant uptick in interest for our global strategy from both Australian advisers and investors – in particular, investors wanting greater exposure to global equities in their search for superior returns in an otherwise low-growth, low-return environment.”

The Hyperion Global Growth Companies Fund is also available to advisers on BT Panorama, BT Wrap, Asgard, Hub24, mFund and Netwealth.

“Hyperion runs concentrated portfolios and this fund is no different. Our individual stock weights are often several times larger than those of our competitors. At Hyperion, we invest like business owners, taking a bottom-up approach that aims to produce superior investment returns for our investors over long-time horizons,” Samway added.

The Hyperion Global Growth Companies Fund has a “Recommended” rating from Zenith Investment Partners. The Hyperion Global Growth Companies Fund has delivered investors a 19.7% p.a. return (after fees) since inception in June 2014 to October 31, 2018, generating 7.5% p.a. above the fund’s benchmark, the MSCI World Accumulation Index (AUD) over the same time period.

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Tim Samway

Award winning high-conviction equities manager Hyperion Asset Management (Hyperion), has yesterday announced that its latest fund, the Hyperion Global Growth Companies Fund (Global Growth Fund) will be open to direct applications from retail investors.

The Global Growth Fund was established in May 2014 with seed money from Hyperion’s investment team. It is run by Hyperion’s, long-standing, successful investment team, using the same philosophy and process which has produced consistently strong returns from their Australian equity portfolios.

The Global Growth Fund aims to invest in the highest quality global companies in developed countries, with the aim of producing medium to long-term growth and income. Since inception, performance has been strong, re-affirming that Hyperion’s bottom-up approach to long-term investing translates successfully to global markets.

Speaking about the Global Growth Fund, Hyperion Managing Director, Tim Samway, said that the creation of an international equities fund was a natural consequence of the fact that Hyperion already has a deep understanding of many international markets.

“Many of the Australian listed companies we invest in derive a significant proportion of their revenues, and more importantly, their growth, from offshore operations.

“As a result we have always done a great deal of research into the global competitors to our domestic stocks, so it seemed like a logical extension to further that research and invest ourselves.

“We’ve had our own money invested for two years now, and we’re really pleased that our investment strategy has been as successful in overseas equity markets as it has in Australia,” Mr Samway said.

Mr Samway went on to explain that investors looking for long-term growth would be wise to consider global equities in addition to their domestic portfolios.

“Global equities offer a wider universe of quality companies, with larger addressable markets which translates into better projected performance and downside protection for portfolios.

“At Hyperion, we invest like business owners, because we believe that well-managed companies with solid fundamentals and structural growth opportunities will outperform over the long term.

Mr Samway concluded by saying that Hyperion’s aim has always been to provide long-term capital growth and income to investors, and that the reality now is that there are more companies to choose from if they expand their investment universe to offshore markets.

“That’s why we’re really pleased to offer retail investors the chance to invest in high-quality global companies with an Australian manager they know, and which has an established and successful track-record in equity investment,” he said.

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Tim Samway

While many market commentators warn that we are in for a bumpy ride in 2016, equities manager Hyperion Investment Management remains calm and sanguine after a sustained period of exceptional outperformance.

In fact, according to Tim Samway, Managing Director of Hyperion Asset Management, investors who continue to focus on quality stocks and an intelligent long term investment horizon have no cause for concern.

Mr Samway described the current volatility and other features of the global market such as commodities slumps and a lower AUD as short term factors that are much less relevant to Hyperion’s investment view than the opportunities presented by companies with outstanding customer value propositions, strong balance sheets and the ability to grow intrinsic value for shareholders.

“Look at our investment environment,” he said. “The fact remains that we have a substantial ageing population of a reasonably wealthy middle class. That spells opportunity. The question for us is, where does that opportunity lie? And the answer is in seeking and predicting much longer term themes that develop over years and change markets for good, not short term cyclical fluctuations like the volatility of the exchange rate or gyrations in commodity prices.”

Mr Samway cited developments such as cloud computing, online fast food ordering and rapid delivery and other tech-related shifts that have fundamentally reshaped whole industries as examples of the profound long term movements the Hyperion investment team anticipates and acts upon.

Some examples of the kinds of companies Hyperion favours are:

• Cloud computing related stocks
• Technology stocks
• Global stocks, which are taking market share away from competitors by presenting customers with a substantially better value proposition (e.g. Dominos)

“We need to look at what’s disruptive and consider what kinds of new technologies and new business models are going to make a difference to their customers. What will their long term effects be? And how can investors capitalise on that?

“For example, Technology One is changing its client base from a software sale to an annuity income stream of higher quality by converting its software to the cloud.”

In further support of the Hyperion position, Mr Samway cited the restricted ability of banks and miners to increase their profits due to low credit growth and continuing weak commodity prices due to low global economic growth.

“If you need any further evidence of the need to look beyond the benchmark and think longer term about investing in the stocks of the future take a look at the top 50 stocks by size. The key challenge for investors is that a substantial number of these companies will struggle to produce anything like an acceptable return. In some case investors must look outside mature industries for future growth,” he explained.

Hyperion is well positioned to make the argument based on its long term performance figures, which are among the best in the market across all timeframes from inception in 1996 to the present. Hyperion has produced a return of 14.41%pa since inception in 1996, which is just over 5% better than the broader Australian market has achieved over that time.

“We are confident that over the next five years, economic conditions point to a sustained, albeit low growth market. Make the right decisions now and you will be ready to reap the rewards,” concluded Mr Samway.

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Joel Gray

“Jittery investors are struggling to respond to market volatility and must accept that capital preservation is now a real risk.”

This is the view of Joel Gray, Portfolio Manager at award-winning Australian equities manager Hyperion Asset Management, who yesterday said that continued subdued global economic data has vindicated the US Federal Reserve’s decision to keep rates on hold, and that markets remain jittery as a result.

“Staying focused on fundamental drivers of return can be difficult in periods of uncertainty and market volatility, yet it is actually more important than ever when the market becomes unpredictable.

“A rising tide may lift all boats, but as the tide recedes, only those companies with a robust and sustainable business model will preserve investors’ capital, and continue to perform into the future,” he said.

Hyperion’s view is that all businesses should be assessed from the point of view of protecting long term returns, and that there are four key, unchanging attributes which define a successful company and translate into outperformance for investors.

These are:

• A high return on capital, in other words, efficient and profitable use of capital.
• The ability to grow organically, without the use of excessive debt, and without falling prey to investors’ desire for high dividend payouts but rather re-investing into the business.
• A sustainable competitive advantage, and hence control over pricing.
• A predictable earnings stream.

Mr Gray said that only businesses which exhibit these attributes will continue to do well, and that attempting to circumvent rigorous due diligence and stock-specific research in favour of simple market metrics can be dangerous.
“A good example of what I’m talking about is the price-earnings (PE) ratio, which measures a company’s share price relative to its per-share earnings.

“For many investors, this ratio provides buying guidance, and in theory, a low PE ratio can indicate that a company is undervalued, and prompt them to buy. Unfortunately, the experience of the global financial crisis proved that buying solely on the basis of a low PE can have disastrous results.

“Except in extreme pricing environments, business risk trumps pricing risk,” Mr Gray said.

In conclusion, Mr Gray said that it was understandable that investors are concerned about market volatility, particularly given the subdued outlook for global growth, the slowdown in China and the uncertainty surrounding the timing of the US Federal Reserve’s decision on interest rates.

“There’s no question that volatile markets throw up both opportunities and risks. At the same time, capital preservation and performance over the long term will always stem from the strength of the underlying business and not on short term-market movements.

“The good news is that investors who are able to keep their head and maintain a steely focus on the fundamental quality of the businesses they invest in need not fear capital loss in the short term.

“And better still, they will be rewarded with outperformance in the long term,” Mr Gray said.

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Tim Samway

Boutique Australian equities fund manager, Hyperion Asset Management, announced that it will close its institutional business to new inflows.

In addition, Hyperion will soft close its retail funds – meaning it will no longer accept new investors into its two flagship equity funds, the Hyperion Australian Growth Companies Fund and the Hyperion Small Growth Companies Fund, although existing unit holders will be able to continue to invest in both funds.

Hyperion’s institutional mandates will be hard closed immediately. The soft closure for retail investors will take effect as at 30 April 2015.

The decision to limit its funds inflow was made as a result of the manager’s continual review of capacity and its unwavering commitment to its investment philosophy.

Hyperion’s Managing Director, Tim Samway, said that substantial investment out-performance over the long-term has driven strong inflows to Hyperion’s funds, with the amount of Australian equities under management recently reaching $5.5 billion.

“This will be our 20th year of operation and over that time we have produced market leading investment out-performance for our clients. As a result, our funds have attracted substantial investor interest. Potential capacity issues are a side effect of such success.

“The best interests of our investors are at the heart of all our decisions. We are taking this proactive approach to limiting total assets under management to safeguard future investment performance for clients. By limiting funds before reaching our capacity we will preserve the concentration of high quality stocks in our portfolios and provide ample headroom for future outperformance and inflows from existing retail clients,” said Mr Samway.

Hyperion’s Australian Growth Companies Fund and Small Growth Companies Fund have achieved total performance, net of fees, of 12.7% p.a. and 17.1% p.a. respectively since inception beating their respective benchmarks by 2.4% p.a. and 10.3% p.a. Hyperion funds are currently ranked 1st and 2ndin the Morningstar Australian Institutional Sector Survey in their respective asset classes over the last 10 years.

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