Kerry Series

The 8IP Australian Equity Impact Fund invests in ASX-listed companies that have a positive social or environmental impact and 8IP seeks to measure that impact.

An increasing number of investors are looking to align their investments with their values. The challenge in Australia is do this in listed equities given that the stockmarket has significant exposure to the big banks and resource companies. As a specialist small companies’ funds manager, 8IP have been conducting fundamental research on listed Australian companies for over 5 years.

Kerry Series, CIO of 8IP, commented “We increasingly felt that there were sufficient listed companies to create an impact investing fund and so we seeded the 8IP Australian Equity Impact Fund in January 2017. My belief is that impact investing can produce attractive returns for investors as many of the underlying problems addressed by these companies are long-term megatrends”.

Currently (@28 February 2018) the portfolio is invested in 29 companies listed on the ASX, across the 10 impact focus areas listed below. Each investment is cross-referenced to the UN Sustainable Development Goals and the portfolio has covers 9 of the 17 goals.

Brian Thomas, General Manager – Business & Investments at 8IP concluded “This unique Fund gives investors an opportunity to invest in a truly impactful way that was not previously available to investors with $10,000 to invest. Aside from the usual return and portfolio information, investors also receive a detailed impact assessment each year”.

Key Points and Summary

• Research based – Companies are selected for inclusion in the portfolio based on fundamental research by the 8IP investment team. A detailed report on the measureable social and environmental impact of the investee companies is produced annually.
• Examples of “Impact” track record –  Last financial year, companies in the Fund generated 8,242 GWh of renewable energy, managed energy efficient lighting covering 562,000 sq metres, recycled 227,000 tons of paper and provided 1,678 rental accommodation for seniors with a satisfaction rating of 81.8%.
• Strong investment track record – The Fund was previously only available to sophisticated investors where it generated a post-fee cumulative return of +23.6% compared to the cumulative return from the All Ordinaries Accumulation Index of +13.2% (the investment benchmark for the fund) over 13 months since inception on 31 January 2017.
• “Go anywhere portfolio” – As a smaller companies specialist, 8IP can look across the market to find exciting impact companies, rather than focusing on weighting stocks to a benchmark index.
• Growing new investment area – According to the “Impact Investing Australia Report”, more than two thirds of all investors surveyed expect impact investing to become a more significant part of the investment landscape in the coming years.

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Principal and Chief Investment Officer at Eight Investment Partners (“8IP”), Kerry Series stated “Brian brings his extensive experience to 8IP which combines investment expertise and knowledge of the business of funds management. This is a significant addition to our team”.

“I am very happy to join a boutique funds manager that has a strong investment culture”, Thomas commented. “The track record of out-performance over the past 5 years of their small companies equity products is testament to the focus, experience, and networks of the investment team. The 8IP Australian Small Company Portfolio, a highly concentrated portfolio offered as an SMA, has achieved exceptional gross returns of 42.1% per annum since launch in January 2014. I’m also excited by the 8IP Australian Equity Impact Fund that was launched early last year to invest in ASX-listed companies that have a positive social or environmental impact. As well as supporting great companies and seeking to measure their impact, the portfolio has a gross return of 24.0%”.

“We’re pleased that Brian has decided to work with us to develop our market presence. 8IP has been managing small company equity products for just over 5 years, primarily on behalf of institutional investors, but we also have offerings for retail and high net worth investors that have capacity.” commented Stephen Walsh, Principal and Portfolio Manager.

This role also enables Brian to continue with his passion for Board work, consulting, public speaking and investment committees.

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Perennial portfolio managers are each investing alongside clients’ monies.

“Investors are perhaps rightly cynical about fund managers’ interests being truly aligned with their own and our portfolio managers have stepped up to the challenge in this new portfolio”, said Brian Thomas, General Manager – Investment Services at Perennial.

“Apart from their investments being aligned, the managers will close the Trust to new investors when funds exceed $150 million.

“It is not in anyone’s interest to have funds grow too large in the microcap sector, and the ability to remain nimble and move in and out of microcap companies starts to become increasingly hindered over this level, Thomas added.

The decision to create the new Trust was based on a painstaking review of 10 years’ worth of data from the Perennial Smaller Companies Trust.

“The results were positive and humbling at the same time” said Andrew Smith, the lead portfolio manager. “Positive in that it showed that the overall return was strong. Humbling because it forced us to reflect on certain decisions that detracted from the fund. On the positive side, this gave us the opportunity to create new processes and metrics to avoid making similar decisions in the new portfolio,” he said.

Mr Smith said the key method of reducing risk was to focus on those companies with minimal debt or ideally large net cash balances (particularly if the company has a limited financial history). Given the almost 2000 companies in our universe we run several screens (on historical and broker forecasts if available) to filter out concept stocks so we can then focus our research efforts on quality ideas in growing sectors.

“In addition to these screens, we are on the road a lot, as a team we conducted over 600 company visits last year. Once we have identified the best ideas we do detailed modelling and put together the best value portfolio of close to 50 stocks,” he said.

Perennial’s preferred stocks at present are RPM Global (software to mining companies), PWR Holdings (high end technology for racing cars) and Imdex (drilling technology provider).

Lonsec rated the Trust Recommended in its review, stating: “Lonsec has strong conviction the financial product can generate risk-adjusted returns in line with relevant objectives. The financial product is considered an appropriate entry point to this asset class or strategy”

The Trust is also available to investors through the HUB24 platform.

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The product seeks to dynamically safeguard investors against large downside losses while allowing for full participation in domestic equity market gains. It provides investors with a bottom-up, Australian equities portfolio comprised of large and small cap listed companies and uses equity derivatives and cash to dynamically protect the portfolio through market cycles, thereby reducing the magnitude of significant negative returns as they occur.

Called the Perennial Value Wealth Defender Australian Shares Trust, the fund was launched by Perennial Value Management Limited (Perennial Value) in late May 2014. It has subsequently secured a Recommended rating from independent investment research firm Zenith Investment Partners.

Head of Retail Funds Management for Perennial, Brian Thomas said the Zenith rating was a welcome independent validation for the fund. The fund has also resonated strongly with financial advisers in the days since its retail launch.

“The stark reality we all faced during the GFC was that a 50% fall in our share values required a 100% future return to get back to pre GFC levels, and investors are expecting further volatility in the future. According to recent Investment Trends research, 91% of financial advisers are expecting two or more market crashes in the next 20 years and the investors we speak to have similar outlooks, ” Mr Thomas said.

“We believe Perennial Value has created an innovative product that is purpose built for the needs of investors and it brings a unique and dynamic approach to managing downside risk.”

“The fund’s unique design and underlying protection process is unlike anything available to Australian retail investors to date,” he said. Mr Thomas said Perennial Value’s considerable investment management expertise (led by renowned value investor John Murray) coupled with its dynamic portfolio protection strategies adds a new dimension to the management of market volatility on behalf of investors. The fund’s dynamic portfolio protection strategies are managed by Perennial Value’s Dan Bosscher.

Zenith’s report said the fund: “…provides investors with a unique exposure to Australian equities which is intuitively appealing. Through the use of dynamic protection strategies, the fund aims to create an asymmetric return/risk profile that is designed to reduce losses in market downturns by approximately 50 per cent whilst allowing for full participation in market upswings. Zenith believes the fund is an innovative product managed by a highly capable risk expert in Dan Bosscher.”

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Corners for Kids ride 2012

Financial Services has generally gone through some tumultuous times post the GFC but the would be bikers in our industry are still getting into their leathers and raising money for kids’ charities in a motorcycle rally from Sydney through to the Snowy Mountains and the South Coast and back through Gundagai before heading back home on 7-11 March.

Corners for Kids was started 14 years ago and is still going strong with riders from all parts of the industry – Financial Planner and one time FPA Chair, Ray Griffin; one of the founders of Corners for Kids and now with AdviserVoice  will lead the charge on his “naked” Triumph  – “All the riders must raise money for kids’ charities and the reception we get in the country towns we visit on the way when they know about the purpose behind the ride is quite moving”, Ray commented. 

This year the ride supports The Inspire Foundation which is focussed on preventing youth suicide and Create, a charity that supports kids living in out of home care.

“It’s also great to be with a bunch of fundies, lawyers, financial planners and service providers NOT talking about FoFA or financial markets !” added Brian Thomas from Perennial. 

Contributions are welcome by visiting the Corners for Kids website.

About Corners for Kids :-14 years ago, Financial Industry leaders, Brian Thomas (Fund Manager Executive), Ray Griffin (Financial Planner and then FPA President and Director of Adviser Voice) and Lynn Ralph (then CEO of the industry body now known as the FSC) got together over a few beers and decided to bring their shared passion for motorcycling into a catalyst to get Financial Services people together to support youth charities and thus “Corners for Kids” was born. Corners for Kids has spawned a number of events over the years with the focus being on a motorcycle rally where the riders all agree to raise money for the nominated charities. To date the initiative has ridden over most parts of South Eastern Australia and Tasmania in a spirit of camaraderie and raising awareness of critical issues in the country towns they visit whilst also raising over $650,000 to help our youth. Although Corners for Kids was one of the first charitable initiatives across the industry bodies it’s been positive to see these bodies subsequently develop their own successful fund raising initiatives.

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