Simon Conn

IML, specialist Australian Equities Fund Manager, has announced that Simon Conn, Senior Portfolio Manager for its small–mid cap strategies, will retire in June after 27 years of service.

Simon Conn joined IML in 1998 as one of the founding members of IML’s investment team and has led the small and mid-cap portfolios for 25 years. He will retire at the end of June 2025, remaining as a consultant until the end of September 2025. 

IML CEO Damon Hambly said, “Simon’s dedication and expertise has been an asset to IML, the team, and our valued clients for 27 years, and it’s with gratitude that we sincerely wish him a happy retirement. Simon’s leadership of the team, and our considered approach to succession planning ensures that our portfolios will continue to be managed in the same disciplined manner that we applied since inception, focusing on quality companies trading at reasonable valuations”.   

IML portfolio manager Marc Whittaker will assume leadership of the small and mid-cap team from the end of June after jointly managing IML’s small–mid cap portfolios with Simon for eight years. Marc will be supported by Australian Smaller Companies co-portfolio manager Lucas Goode who joined IML in 2018, and the broader IML investment team. 

Senior Portfolio Manager Simon Conn said, “It’s with great confidence that I retire, leaving the small and mid-cap portfolios in the very capable hands of Marc and Lucas. My decision was made with much consideration after what has been a very fulfilling career at IML. Clients can rest assured that I believe that there’s no better time to pass on the baton. The team have demonstrated their ability to manage the funds in line with IML’s disciplined investment approach over several years.” 

Marc Whittaker, who joined IML in 2016 and currently co-manages the Future Leaders and Private Portfolio funds said, “I’m grateful to Simon for his mentorship over the years, instilling the IML ‘quality and value’ approach into everything we do for our clients. It’s been an honour to work alongside Simon, and I’m thrilled to step into this new role, leading the IML small and mid-cap team.” 

Prior to IML, Marc spent 6 years as a portfolio manager at Milford Asset Management and has been working in Australian equities since 1999.  

IML’s flagship small cap fund, the Investors Mutual Australian Smaller Companies Fund, has delivered above-benchmark returns while delivering less volatility than the small cap market since its inception in June 1998. 

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Damon Hambly

IML’s two flagship funds, the Australian Share Fund and Australian Smaller Companies Fund, this month celebrate a 25-year track-record of delivering better returns than their benchmarks, with better downside protection and lower volatility^[1].

The funds launched on June 30, 1998, in the same year Anton Tagliaferro founded IML, with a singleminded focus on providing attractive long-term returns for clients, with lower volatility than the sharemarket. IML has achieved this by consistently investing in high-quality businesses that are undervalued by the market.

The Australian Share Fund has returned 9.8% per annum since 1998, after fees, 1.3% above its benchmark while, on average, falling 35% less than the market on months when it falls. $10,000 invested with the fund in 1998 would now be worth $103,757 after fees, $26,783 more than its benchmark^[2].

The Australian Smaller Companies Fund has returned 12.3% per annum since 1998, 6.7% above its benchmark while, on average, falling 54% less than the market on months when it falls. $10,000 invested with the fund in 1998 would now be worth $179,779 after fees, $140,960 more than its benchmark^[3].

IML Chief Executive Damon Hambly, says that IML’s investment philosophy is just as relevant today as it was in IML’s early days: “IML’s style of investing is particularly well suited to periods of higher sharemarket volatility and economic uncertainty, like we are experiencing right now. We have a strong track record of both protecting clients’ capital during market declines and delivering returns with lower volatility. We are also proud of our history of active ownership – of standing up for shareholders, and challenging boards and senior management when we believe shareholders’ best interests are not being served.”

Back in 1998 Google was founded, the ‘Tech Boom’ was in full swing and unprofitable dot.com stocks were becoming all the rage. It was a tough time to attract investors to a value and quality fund. It wasn’t until the ‘Tech Wreck’ started in March 2000, and share markets plunged around the world, that many investors started returning to investment fundamentals. In 2002, as the fallout from the Tech Wreck continued, the ASX 300 fell 8.64%, while IML’s Australian Share Fund was up 4.25%.

Simon Conn is Senior Portfolio Manager for the Australian Smaller Companies Fund. He has been at IML since the company launched, working with Anton to put in place the investment processes and frameworks that continue to this day. Speaking about the fund’s 25th anniversary, he said: “New funds are launched all the time, so to have achieved such a great track record of returns over 25 years is a real vindication of our investment style. What is more satisfying to me than the numbers though, is the way these returns have been delivered.

There are a lot of low-quality companies in the smaller end of the market, so our disciplined focus on quality companies with a strong competitive advantage, recurring earnings and capable management which are trading at reasonable prices has helped us grow capital over time, while protecting our clients’ capital during more difficult times.

Another pleasing outcome of the fund has come from our focus on profitable companies that pay dividends, this has allowed the fund to continually generate income from its underlying investments and enabled us to pay a distribution every six months since 1998.

I’d like to thank all of our clients who have trusted us with their hard-earned savings for so many years, we hope you will continue to trust us for many years to come.”

Daniel Moore and Hugh Giddy are the portfolio managers for IML’s Australian Share Fund, both joining the firm in 2010. Commenting on the fund’s anniversary Hugh said: “It’s a responsibility that Daniel and I take very seriously, managing a fund with such a long, proud history that has played a key role in many of our clients’ investment portfolios.

I think the key to our success over so many years has been sticking to the investment philosophy that we know works – our relentless focus on both quality and value – while at the same time continuing to improve our investment processes.”

——–

Notes:
[1] Benchmark for the Australian Share Fund is the ASX 300 Accumulation Index and benchmark for the Australian Smaller Companies Fund is the ASX Small Ordinaries Index, excluding property trusts. Stats are from 1 July, 1998 to 1 July, 2023. Sources: Morningstar Direct, IML. Past performance is not a reliable indicator of future performance.
[2] Ibid.
[3] Ibid.

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Anton Tagliaferro

Australian equities specialist, Investors Mutual Limited (IML), has been awarded a Small Caps allocation / model portfolio inclusion by multi-manager, Alpha Fund Managers.

The IML Small Cap Fund aims to deliver investors with consistent and long term returns by investing in quality small cap companies aligned to their investment philosophy, that is; companies pertaining a competitive advantage, with recurring earnings, run by capable management, that can grow, whilst trading at a reasonable price.

In awarding the allocation, Julien Brodie, Portfolio Manager at Alpha, said, “We selected the IML Small Cap Fund because of the quality and insight of the investment team, defensive characteristics and importantly its ability to navigate market rotations (such as during 2016) and deliver consistent outperformance across time.”

Simon Conn, IML’s Small & Mid Cap Senior Portfolio Manager said, “We are delighted that Alpha has chosen to add our Small Cap Fund to their clients’ portfolios. IML will aim to deliver their clients with consistent capital growth over the long term with lower volatility, as has been the hallmark of all IML funds since our inception in 1998.”

Anton Tagliaferro Investment Director of IML added: “We thank Alpha for their support and faith in IML’s process following their comprehensive due diligence process and we are pleased they have chosen IML as they understand and are aligned to our investment philosophy and process”.

The allocation follows IML recently being awarded Morningstar’s Small Cap Manager of the Year, along with their strong research house ratings across all strategies.

At the end of June 2017, the Fund delivered investors 14.8% p.a., 17.2% p.a. and 18.1% p.a. over one, three and five years’ net of fees, respectively.

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IML has successfully managed money on behalf of our clients in Australian equities, including the small cap sector, for almost 20 years and has built a track record of good consistent returns over different market cycles in this area.”

IML’s portfolio manager for IML’s small and mid cap strategies, Simon Conn who has been an integral part of the investment team since its inception in 1998 said “it is critical when it comes to investing in the small and mid cap part of the market to perform one’s own detailed research and to remain disciplined in all market conditions.

Since IML’s inception almost 20 years ago, there has been lots of volatitity in the equity market with several booms and busts over this period.

We have managed to steer our way through all this by always retaining our focused and disciplined process and have done a very good job for investors over the long term.”

Simon added “We always focus on companies which have a competitive advantage, recurring and predictable earnings, that are run by capable management and which can grow over the long term. In the uneven and subdued economic environment of recent years we have focused mainly on companies that we believe can continue to generate reasonable earnings growth through a diverse range of strategies such as growing market share, through making accretive acquisitions or through cost cutting or restructuring programmes.”

Anton concluded by saying: “Our clients should always know what to expect when they invest in an IML Fund – which is a diverse portfolio of good quality listed Australian stocks whose medium to long term earnings prospects look good and whose valuation we find appealing.”

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Prior to joining IML, Marc was employed as a Portfolio Manager at Milford Asset Management for 6 years with responsibility for their Australian equity portfolios. Before working at Milford, Mark worked for 7 years at Lazard Asset Management as a Senior Industrials Analyst.

Anton Tagliaferro said; “We are very pleased to have appointed someone of Marc’s calibre and experience to IML. This senior appointment is another important step in broadening and deepening the strength and experience of IML’s investment team, particularly in the small cap sector where we are experiencing good growth thanks to continued retail inflows and an increasing institutional following.

“Marc comes to IML with a strong numerate background and excellent portfolio management and research skills from his many years experience working at other respected value managers. This makes Marc well suited to a career at IML and Simon is delighted to have Marc assisting him in the small cap sector.”

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Simon Conn

Investors Mutual Limited (IML) has urged investors and their advisers to shift their thinking when it comes to allocating small caps. Rather than just adding growth to a portfolio, as is the traditional view, small caps can provide diversification to a deep range of industries and generate sustainable long-term returns.

Senior Portfolio Manager and founding member of the IML team, Simon Conn said that small caps are often perceived as the “land of great hope,” with investors looking for the next big thing or business owners looking to tap in to a potentially lucrative pool of investor capital.

“The small cap index and its sector composition tend to reflect the prevailing trends of the day, but these fads come and go and often just don’t deliver sustainable returns over time to the investors chasing them,” Mr Conn said.

Over the last 10 years, the Small Ords Accumulation Index has delivered 2% p.a., whereas a portfolio of quality small cap stocks, such as the IML Smaller Companies Fund managed by Mr Conn, has delivered the far superior return of 8.5% p.a.

“Ultimately, investors need to rethink the way they approach small caps. The chase for capital growth has made small cap investing a short-term play for the majority which, evidence suggests, is an unsuccessful strategy,” added Mr Conn.

“By investing in small caps on a long-term basis with a focus on quality companies that provide portfolio diversification, both the income and capital growth returns for investors are broadened. This is particularly important given the concentrated nature of the Australian market index, exacerbated by the subdued economic environment,” he said.

Small caps: diversity and depth to endure the economic cycle

Against a backdrop of a subdued economic outlook in Australia and overseas, IML believes diversification across market caps and sectors is an investor’s best protection. This is particularly true when it comes to Australian equities, where some 60-70% of the ASX300 is concentrated in just two sectors – resources and financials.

By contrast, the range of sectors available within the small cap universe is wide, providing investors with a diversity of opportunities over the long-term.

“These diverse stocks are often less researched, offering far more opportunity to find quality undervalued companies. IML is focused on such quality companies, which we believe can continue to do well despite the subdued macro environment,” Mr Conn said.

During his past two decades at IML, Mr Conn has found that smaller certainly doesn’t always mean lower quality.

“The attributes of a quality company include a strong competitive advantage, recurring and predictable earnings, and capable management that can grow these earnings and dividends over time. We have discovered a number of market leaders with these positive attributes within the small cap sector, these companies just happen to operate in a smaller industry,” Mr Conn explains.

The following table is a sample of such quality companies in which IML has successfully invested:

*Rounded to nearest whole number.  Source: IRESS.

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