When celebrities speak to the media, they often do so on the condition that they can promote a product or brand. These people are called “brand ambassadors” and examples include Jessica Mauboy for Target, Iggy Azalea for Bonds underwear, Gemma Ward for Coke, Dannie Minogue for Westfield, Michael Clarke for Oral B tooth brushes and Shane Warne for Nicorette. The list goes on.
Enter veteran fund manager and Under the Radar Report investment committee member Geoff Wilson. Maybe he’s not everyone’s idea of a celebrity, but you can’t deny that in the investment markets he has a loyal following.
His company’s flagship fund WAM Capital has racked up an average return of 18 per cent a year (before fees) since 1999, which compares with the ASX All Ords performance of less than 9 per cent a year over the same period.
Instead of a consumer product, Wilson is raising money for a listed investment company called “Future Generation Global Investment Company”.
Wilson and others intend to raise $550 million in order to invest what its marketing material calls “Australia’s first internationally focused LIC with the dual objectives of providing shareholders with diversified exposure to selected global fund managers and changing the lives of young Australians affected by mental illness.”
In Wilson’s own words: “All the fund managers and service providers are doing it pro bono and 1 per cent of the (net tangible assets) goes to charities like beyondblue. If we raise $550 million that means we’re giving $5.5 million to charity in the first year and we would be the biggest funder of mental health in Australia, excluding the government.
“The aim is to help de-stigmatise mental health, and it’s a positive story for the investor because it gives you exposure to a manager you can’t normally get access to and you pay less than what you would normally.”
The fund will have some high-profile domestic-based fund managers including Hamish Douglass’ Magellan Financial, Ashok Jacob’s Ellerston Capital, and Rob Luciano’s VGI. It also includes the New York-based quantitative manager Neuberger Berman, which manages $US250 billion. Think about that for a minute.
The fund plans to invest in companies around the world with the aim of maximising the total return with a combination of capital growth and income. In this way it intends to distribute fully franked dividends to unit holders.
Luciano’s VGI has made headlines recently for selling Slater & Gordon’s (SGH) stock short and profiting from the $1 billion wiped from its market capitalisation since reports emerged in June that ASIC was considering a probe into its accounting policies and its relationship with the audit firm Pitcher Partners.
The last time we spoke to Wilson earlier this year, Slater & Gordon was one of his fund’s biggest positions. In fact, it was still a big position as at April 30.
We are happy to say that a month later, his funds had exited, well before the stock halved in the space of a few days. The experience is an important one for understanding Wilson Asset Management’s investment strategy.
“We are looking for under-valued growth companies and buy them if we can see a catalyst to change the valuation. This can be a positive catalyst or a negative catalyst,” Wilson says. “We bought Slaters a number of years ago because it was expanding by acquisition and we saw a competent management team who were successfully doing this, particularly in the UK. This was the catalyst, the expectation of earnings surprises from expansion.
“The bottom line is that we tend to buy early and sell early.” Wilson then embarked on a version of Swan Lake for investors. Bear with us.
“The catalyst is our ability to look at something that the market thinks is an ugly duckling, but which we believe will become a beautiful swan. On the other hand, we sell when the market believes the company is a beautiful swan.
“You can’t fall in love with any of your investments. You’ve got to understand that you have an ownership bias; how you have a bias to everything you own.”