Simon Shields

Leading Long/Short Australian Equities Fund Manager, Monash Investors, has undertaken Australia’s first restructure of a Listed Investment Company (LIC) to launch an exchange traded managed fund on the ASX to offer investors daily liquidity at the fund’s NAV.

The Monash Investors strategy has delivered annual average returns of 12.7% pa over 9 years since inception in July 2012.

Following an overwhelming support of shareholders – 99.98% vote in favour – Monash Absolute Investment Company (ASX: MA1) has restructured to Monash Absolute Active Trust (ASX: MAAT (Hedge Fund)), which will commence trading on the ASX on 10 June 2021.

In an environment of ultra-low interest rates, a notable feature of MAAT is the manager’s intention to make 6% p.a. distributions, paid quarterly. MAAT has also lower manager fees than the LIC.

“Having a top performing fund listed at less than net asset value has been frustrating for our investors and ourselves as managers,” said Monash Investors co-founder and Portfolio Manager, Simon Shields.

“Many LIC managers have tried and failed at resolving this discount situation through buybacks and other strategies, but with without success. Monash decided the clearest, simplest and fairest way forward for our investors was to restructure MA1 into an Exchange Traded Managed Fund utilising the ASX AQUA rules.

“We are the first to do so, as far as I am aware, and I suspect we will not be the last.

“This restructure breaks the permanent capital nexus, which we are most comfortable with. We believe this restructure will not only benefit unit holders by providing appropriate fair value liquidity but will create a pathway for greater FUM given the inherent attractions of the fund.

“MA1, and now MAAT, stand out in the Australian listed funds marketplace,” said Shields.

MA1 was voted ‘Best Listed Alternative Investment Product’ at the 2020 Australian Alternative Investment Awards.

“MAAT will continue to offer the same investment philosophy as MA1, namely predominantly long Australian equities, but also somewhat short, benchmark unaware, a concentrated portfolio of best ideas and a target of double digit returns over the cycle.

“The approach is one of seeking absolute returns, rather than relative returns, through active management. It has been consistently successful over a period of nine years since inception.

“We believe that more wealth can be created, and with lower risk, by aiming to achieve a positive payoff with each investment versus investing in a broad portfolio of stocks that simply rise and fall with the market. We have achieved our objectives by investing in a concentrated portfolio of compelling stocks that offer considerable upside and by shorting expensive stocks that are at risk of falling,” Shields said.

The Monash Investors strategy returns to 31 May 2021 are:

•  3 years 17.6% p.a (after fees);
• 5 years 9.7%p.a (after fees);
• 9 years 12.2% (after fees),

“The intention to make distributions of 6% p.a., paid quarterly, along with the innovation of NAV daily liquidity, lower manager fees, and a dual registry allowing investors to access the fund directly through the ASX or the Responsible entity are the significant modifications to the operation of the original fund.

“The outlook for Australian equities investing is extremely positive given the emerging pandemic recovery and the fiscal and monetary stimulus being pursued by the authorities,” said Shields.

“And we have proven we have a team that can identify value and opportunities in the Australian markets,” said Shields.

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Simon Shields

Monash Absolute Investment Company Limited (ASX Code: MA1) has announced that it will offer shareholders the opportunity to participate in an equal access share buy-back of up to 10% of its ordinary shares. The buy-back will be offered to shareholders on an equal access basis in the first quarter of the 2019 financial year, with the price set at a 5% discount to pre-tax net-tangible-asset backing (NTA).

Simultaneously, the Company is also offering existing shareholders (on the register at 7pm on 19 June 2018), an opportunity to participate in a share purchase plan (SPP) of up to the same quantity of shares as the number bought back, with the issue price set at the same 5% discount to pre-tax NTA. Shares not taken up in the share buy-back will be offered for placement to new and existing institutional investors at the same discount.

Discussing the reasons for the buy-back, Monash Investors Simon Shields, Co Portfolio Manager, said that the decision has been made in order to improve outcomes for shareholders by addressing two interrelated issues.

“It has become clear to the Board over recent months that reducing the discount to NTA of the Company’s share price, while at the same time increasing liquidity in the stock, are among our most important priorities.”

“We reviewed a number of options, and decided that creating a liquidity event via a buy-back and share purchase plan will help reduce the discount to NTA.  Prior to the announcement, the shares were trading at 82 cents, a 17% discount to the 98.5 cent pre-tax NTA, which is not ideal for shareholders.  There is no reason why the shares should now more closely track the NTA performance, given the liquidity we are now providing via our innovative solution.”

“And the fact that we are offering the equivalent number of shares available in the off-market buy-back to new and existing shareholders at the same time means there will sufficient liquidity for these shareholders to make additional purchases.”

“At the same time, fixed expenses will be kept low, which means that net performance will not be significantly impacted” he explained.

Mr Shields concluded by saying that, in his view, the discount to NTA at which MA1 shares have been trading is out of line with the strong performance of the portfolio, and with management’s expectations of future performance.

“We take a long-term view, and have a very positive outlook for the future. We expect performance to continue on the back of our quality portfolio.

At the same time, the lack of liquidity in the stock and the trading discount to NTA has been frustrating for management, which is why we are undertaking this buy-back now,” Mr Shields said.

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Simon Shields

Australian household net worth climbed to new record in the December quarter of 2016, almost hitting $10 trillion, but investors need to protect this wealth through a better management of investment risks, says leading outcomes based equity manager Monash Investors.

Australians now hold a record amount of their wealth in property, with $6.1 trillion of household net worth held in residential land and houses in the December 2016 quarter, against total net worth of $9.4 trillion, according to new figures released by the Australian Bureau of Statistics. Another $4.7 trillion was invested in financial assets, including a record $1 trillion in cash deposits, $2.6 trillion in superannuation and $798 billion in shares.

Simon Shields, co-portfolio manager at Monash Investors, said with such a huge amount of household wealth invested in shares and property, Australians are very exposed to share and property market movements.

“Investors need to proactively protect this near $10 trillion in household net wealth and prioritise their financial goals. Whether it’s losing their money or being overexposed to share or property markets, Australian investors are now much more aware of their desired financial outcomes, and they are articulating them loudly and clearly.

“Investors are going to independent financial advisers (IFAs) and telling them exactly what they want – and clearly stipulating what they don’t want. For most Australians, risk is about losing money. Preserving their wealth has therefore become a key investment outcome,” said Shields, who co-manages Monash Investors’ flagship Absolute Return Australian Equity Fund.

“Most investors are not simply interested in achieving ‘relative returns’ against stock market indexes or against composite benchmarks in the case of balanced funds, in which a huge amount of household wealth in invested. Such esoteric targets have no meaning for people,” said Shields.

“In contrast, outcomes-based investing is becoming more popular because it is about creating wealth and achieving a positive absolute return for investors whether equity markets are rising or falling,” said Shields.

“Importantly, outcomes-based investing means fund managers do not hold stocks just because they form a key component of a benchmark index. We only hold stocks when they offer a considerable amount of upside (long) or downside (short).

“This contrasts with mainstream managers who will often own stocks that are not performing well because they do not wish to deviate too far from the index. So, traditional equity manager often own banks and resources because they are so broadly represented in the benchmark index, regardless of the cycle or valuations,” said Shields.

“With this view, if the index they are tracking falls by 25 per cent and the manager falls by only 20 per cent, they would consider that they have done a very good job for their investors. But we beg to differ, as would most investors, who want to keep their household wealth intact.

“As the numbers highlight, there is too much at stake to leave the management of wealth to the vagaries of the market. More certainty, through outcomes based investing, will allow people to sleep better at night knowing that the wealth they worked so hard to accumulate is kept intact,” said Shields. “That’s why we manage people’s money to avoid the loss of money measured over a full investment cycle. We have no arbitrary objectives.”

IFAs have welcomed the goals-based advice approach – so much so that a new association has been launched called the Association of Goals Based Advice to help IFAs transition their businesses to align with this movement.

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Simon Shields

Absolute return, Australian equity specialists Monash Investors’ has added its flagship fund, Monash Absolute Investment Fund (Fund), to BT Wrap’s menus.

Monash Investors co-portfolio manager Simon Shields, said the firm was pleased to have the Fund available on one of Australia’s leading investment platforms.

“The Fund has experienced strong interest from advisers who are seeking to complement the long-only equity managers in client portfolios, as well as their direct and ETF investments,” he said.

“We also have a number of leading goals-based advisers who prefer investments managed to an “absolute’ style, versus being ‘relative’ to a benchmark.”

The Fund recently received a Lonsec “Recommended” rating, and “Superior” rating from research house SQM.

Monash Investors co-portfolio manager Shane Fitzgerald said the addition of the Fund to BT Wrap was further positive affirmation of the Fund’s support from financial advisers.

“Our point of difference includes our absolute return Australian equities strategy whilst supporting a benchmark unaware and style agnostic approach, attempting to ‘reliably grow investor wealth’.”

The Fund is currently open to investments directly or by advisers via the Netwealth, Hub24, Powerwrap, ManagedAccounts.com.au, Mason Stevens and Macquarie Wrap channels.

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Simon Shields

In the relatively complex world of company valuations, share price fluctuations and forecasts, leading outcomes based equity managers Monash Investors has encouraged investors to think about smarter ways to price listed stocks.

Simon Shields, co portfolio manager at Monash Investors, says many of the firm’s investments are guided by a combination of four attributes, referred to as GIVE:

Growth Monash Investors wants to see strong growth in sales, earnings and/or cash flows for stocks that it looks to buy, and the opposite for stocks it would short.

Insight Monash Investors needs a stock to be misunderstood in some way by the market, and to anticipate how this will be resolved.

Value A payoff (the difference between the target price and the current price) that will meet the hurdles Monash Investors sets for returns.

Event A near term catalyst, if possible.

“We value stocks on an absolute basis, versus adopting a relative approach, because we are targeting absolute returns,” he said.

“We do this by relying on recurring business situations or patterns of behaviour – which we have observed over our careers – that inform our forecasting.”

“As investors, we prefer taking a ‘deep dive’ into interesting companies rather than pricing all companies all the time, which is a misallocation of scarce research resources, and which brings us back to our core objective.”

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Simon Shields

Independent research firm Lonsec has awarded a “Recommended” Rating to the Monash Absolute Investment Fund (Fund). The Lonsec rating follows a Superior Rating received by the Fund from SQM in June 2016.

Monash Investors Co Portfolio Manager Simon Shields said the Rating was welcome affirmation of the Fund’s unique attributes and investment approach.

“Monash Investors was conceived as a specialist asset manager that is deliberately different from the crowd, based on the insights of having previously managed very large pools of capital” Mr Shields said.

“Our most important point of difference is our stated performance objectives, where we are attempting to ‘reliably grow investor wealth’ by providing investors with more certainty over the investment outcomes they receive. Of course, our targets are just that, they are not guarantees, but since our inception in July 2012 we have provided investors with double digit returns after fees, with lower volatility and drawdowns than the market, with no loss of capital in any financial year.”

Commenting on the Lonsec rating, Monash Investors Co Portfolio Manager Shane Fitzgerald said,“It’s encouraging to see Monash recognised for its unique absolute return Australian equities strategy, in a market where demand for such capabilities is rising. We continue to see advisers looking for funds that can support their objective-based advice processes, whilst also providing a satellite option for advisers who manage direct holdings on behalf of their clients, where they recognise that shorting or investing in Pre-IPO stocks is more difficult for them to do.”

The Fund is currently available for use by advisers on Netwealth, Hub24, Powerwrap, ManagedAccounts.com.au, Mason Stevens and Macquarie Wrap.

Mr Shields concluded: “Unlike most fund managers in the market today, we intend to hard close the Fund at $500m to ensure that our investors do not get impacted by the weight of money that can reduce returns over time.”

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Simon Shields

In a low return, high volatility environment that may threaten the lifestyle hopes of a generation of Australian’s and where outperforming an equity index may still fail to deliver on investor’s goals, Monash Investors Pty Limited (“Monash Investors”) offers an investment strategy that may deliver what investors may be looking for: long term certainty, strong returns and capital preservation.

Since the launch of the Monash Absolute Investment Fund (The Fund) in July 2012, Monash Investors is pleased that it has delivered consistent returns, with materially lower volatility than the Australian equity market – an outcome that advisers and investors are now demanding more of in their portfolios, as they move to objective-based and goals-based advice.

Commenting on the Fund’s four year anniversary, Simon Shields, the firm’s founder said, “When we established Monash Investors in 2012, we had a simple idea, and that idea was to build a portfolio that would reliably grow investor’s wealth with the aim to deliver after fee returns of between 12-15% per annum over a full market cycle, and avoid loss of capital in each financial year. To achieve these goals, we had to do something different from the crowd. We had to set the bar very high in terms of the return requirement for a stock to make it into our portfolio, we had to have more flexibility in terms of being able to go long and short, be stock size and style agnostic and be benchmark unware. We also provided capacity for the Fund to invest in pre-IPO stocks such as Catapult, which has risen over 10 times since our initial purchase.”

Pleasingly, Monash Investors have achieved their dual objectives since the Fund’s inception in July 2012, achieving a 14.1% return over four years (after all fees), with no loss of capital in any of the financial years that the Fund has been operating – of course, none of these targets can be guaranteed in the future. Importantly for investors, these performance outcomes have been achieved with a very low net exposure to the market, having little to no leverage, with an average beta of 0.58 over the four-year track record.

In recognition of these strong results, leading research house SQM*, has recently awarded the Monash Absolute Investment Fund (the Fund) a Superior rating, which they suggest makes the Fund suitable for inclusion on most Approved Product Lists (“APL’s). Commenting on the high rating, Andrew Fairweather of Winston Capital Partners said, “We are experiencing strong demand for the Fund from a variety of IFAs and family offices who are moving to objective based advice – the Fund provides a great solution for those who want exposure to growth assets but with less volatility than the market, and with more certainty in terms of the investment outcomes. Since inception, the Fund has delivered on its two return objectives in what has been a very tough market environment.”

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