Smart Investor: Earning It, January 2011

Smart Investor: Earning It, January 2011Earning It

ROADTEST

Naos Long Short Equities Fund

Who runs the fund? Naos Asset Management, a Sydney-based boutique manager formed in January 2005. It’s best known for its award-winning Emerging Companies Long Short Equities Fund, a cross between a small caps fund and a hedge fund.

The basics: Uses the fundamental approach of the Emerging Companies fund, which looks for undervalued companies, and combines it with what it calls “a momentum flavour” by increasing its investment universe to the S&P/ASX300.

The process: Specifically, it can have 85% in the ASX 300 and 15% outside of it, but always in companies with a market cap of at least A$100 million. It is a 130-30 fund, which means up to 30% of the fund can be used in short positions – those that make money if a stock goes down – but the income that comes from those short positions is then used to increase the long positions (those that pay off when stocks go up).

The bottom line: On Morningstar’s numbers it is the second-best absolute return fund in Australia in the year to October 31, delivering 13.58% – second only to the emerging companies fund also produced by Naos. But over three years it is down 3.96% a year; over five years, up 5.48%.

Fees: Capped at 1.17875%, with a performance fee of 20.5% of outperformance over the All Ords (though negative performance must be recouped before this fee can be charged).

Verdict: Not as stellar as its emerging companies sister, but doing well.

NEW FUND

Zurich Investments Small Companies Fund

What is it?

An Australian small caps fund, with a twist.

What’s the twist?

Up to 20% of the fund can go into securities in ex-Japan Asia. The remainder is on a usual small cap mandate: 20 to 50 stocks that are outside of the S&P/ASX 50 Leaders index.

Why?

The idea of a small caps fund is to get exposure to tomorrow’s champions, which have the potential for faster growth than established large cap companies. The downside is that not all small caps realise their potential, so it’s a riskier sector. The Asian bit ties in to the Asia growth story, the most compelling economic driver in the world today. Some might feel, though, that Aussie small caps and Asian growth are better handled in two completely different investments.

Who runs it?

Zurich sub-contracts to Ellerston Capital, a specialist small caps manager founded in 2004. The investment approach is fundamental bottom-up, benchmark unaware, which means it looks at individual companies more than broader macro economics, and makes its picks regardless of how those stocks are weighted within small cap benchmarks.

What’s it cost and how is it doing?

The fee is 1.27% per year, but with a 20.5% performance fee for all performance above the ASX Small Ordinaries Accumulation Index. The fund only started on October 11.

GIZMO

Voltaic OffGrid Solar Backpack

I love the outdoors. I also love my Blackberry. It’s a conflict. I know.

For losers like me comes this solar backpack from Voltaic. It has a solar pocket at the back which soaks up the sun’s rays as you walk, and which in turn charges phones, cameras, ipods, blackberries, games devices and so on. The solar bit is removable and can be attached to other bags.

So how good is solar power? Voltaic says that one hour in the sun equals three hours talk time, and that four or five hours in the sun will fully charge a typical phone. You can also charge the battery from the mains before you go if you want so it’s useful on the grid as well as on the mountain. It comes with a USB port and nine adaptors. Oh, and should you hope to actually carry anything in it, it’s 25 litres. Buy it from Voltaicsystems.com for US$249.

FUND WATCH

Macquarie International Infrastructure Securities

Some big claims are made for the role of infrastructure in a portfolio: not only superior returns but stability and predictable yield. This fund suggests there’s something in the hype.

It takes quite a broad definition of infrastructure, including not just utilities and energy companies but the groups that support them, including business services, industrial materials and even financials. But its top holdings are more pure-play infrastructure holdings worldwide: the Spain-based international infrastructure group Abertis, power groups in Japan and the US, a port in Hamburg, an airport in Paris.

The fund is comfortably beating its closest useful benchmark, but some might feel that the hefty negative three-year number goes against the stability infrastructure is supposed to provide.