Meet the Manager: Gabriel Radzyminski, Sandon Capital
Gabriel Radzyminski is one of Future Generation Australia’s top-performing fund managers, with investment portfolio returns of 36% for the 12 months to September 30 and a strong track record since inception. Known for a high-conviction, activist investment style, he invests in underperforming companies where meaningful change can unlock or improve long-term value.
Gabriel, you’ve had a very strong year. You’re up 36% for the 12 months to September 30 – so what’s driven that performance?
Gabriel: We’ve had a great year, yes, but I prefer not to focus too much on one-year numbers because returns will always vary. What matters more to us are the longer-term figures. Since inception, we’re at around 11.5% net of fees and expenses, which comfortably beats both the large-cap and small-cap indices. Over the past three years, we’ve delivered returns of 19% annualised, versus 15% for the market.
As for what’s driven performance, we’re long-term investors with a relatively low-turnover portfolio. We’re heavily concentrated in a small number of core holdings; our top five make up around 60-70% of the portfolio. We focus on companies we know well and where we believe we can drive change. We target underperforming or mispriced businesses and work to identify the causes of that underperformance. We then work on identifying and implementing changes that can address those causes. The label often applied to us is “activist investor.”
Is that a label you’re comfortable with?
I don’t mind it. It’s accurate. We call a spade a spade.
That’s still a relatively unusual approach in Australia, isn’t it?
Yes, very few managers do this here. We’ve been doing it longer than most – 17 years now – and we’ve run more than 50 campaigns. Many investors prefer behind-the-scenes engagement. That’s not activism; that’s just being a good shareholder. Activism starts when quiet engagement fails.
Some might see similarities between your approach and that of private equity. Is that fair?
It’s not a perfect analogy, but it’s close. On one end, you’ve got traditional fund managers trading pieces of paper. On the other, you have private equity buying control with a premium. We’re in the middle – aiming for influence, not control, and buying at a discount, not a premium.
How do you find these opportunities?
Through detailed, hard-nosed financial analysis. It’s worth noting that not everyone is doing this anymore; passive investing has reduced the amount of price discovery happening in the market. That creates more mispricings, which we can capitalise on.
Can you give us a concrete example of how your activism works?
Take Fleetwood (ASX: FWD), Australia’s largest modular builder. We’ve been a shareholder for about 10 years. For half that time, we were at odds with management. We pushed for the sale of non-core, underperforming assets. When performance still didn’t improve, we helped replace the chairman and then the CEO. Once the new team was in place, they did the hard work of turning the business around. Fleetwood is now one of our best-performing holdings. The investment only paid off because we stayed the course to give time to the new management team to turn the business around.
Do you influence who replaces those CEOs or chairs you unseat?
Sometimes we do. In some cases, we just say someone needs to go and leave it at that. But often we try to help identify suitable replacements. What we don’t typically do anymore is propose our own nominees. That can be divisive with other shareholders.
Do boards get nervous when you appear on the register?
I don’t know. I think we’re often underestimated – and that’s fine with us.
Beyond returns, how do you see your role in improving corporate Australia?
The changes we push for benefit all shareholders, not just us. Our primary stakeholder in any engagement is the broader shareholder base, not the board. Change only happens when we convince a majority of shareholders that our proposals are in everyone’s interests.
Do you ever run into legal challenges around collusion or shareholder coordination?
We’re very careful. We know exactly what we can and can’t do, and we stay well within those lines.
Are there particular sectors or parts of the market where you find more opportunities?
Mid-caps and small caps tend to offer more opportunities; they often have more concentrated registers, making shareholder influence more achievable. We’re currently focused on a live example with Southern Cross Media, where the company entered into a merger with Seven West Media without seeking shareholder approval. That’s possible due to a loophole in the ASX listing rules – one we believe needs urgent reform.
So you’re campaigning not just at the company level, but systemically?
Exactly. We’ve gone to the Takeovers Panel, sought changes to the company’s constitution, and are actively pushing for regulatory review. The Southern Cross situation highlights a flaw in the system and it’s one that affects all shareholders. Directors should not be able to enter into transformative transactions without shareholder approval.
Looking more broadly, what’s your view on the quality of boards in Australia?
The average board would score about 2.5 out of 5 – some would score 5/5 and unfortunately others score 1/5. I think most directors are well-meaning, but that doesn’t always translate into good outcomes for shareholders. Boards work best when there’s a healthy tension between management, directors, and shareholders. Problems arise when boards operate on the assumption that they know best.
You say you’re long-term investors yet you’re all about campaigning for change. Once that’s achieved, don’t you just sell and move on?
Change is not at odds with having a long-term focus. There’s not much point leaving a company on a value-destructive course if you see an opportunity to change directors. Once change occurs, value realisation can take a long time. Using the Fleetwood example again, if we’d sold out after replacing the management, we’d have missed out on the value uplift. We’re not just seeking change for its own sake – we want the resulting payoff.
How often are you successful in your campaigns?
That’s not the right question – the campaign is just a tool. The better question is how often we’re successful in our investments. Our win/loss ratio is over 70%. We’ve had cases where a campaign didn’t fully succeed, but we still made money. Success is defined by outcomes for investors.
What do you believe is at the root of the opportunities you find?
Agency conflict – or people problems. Ego, ambition, and hubris often create dysfunction. Our work is heavily analytical, but the source of most issues we act on is human. Where there’s conflict or failure in leadership, there’s usually opportunity – for us, and for other shareholders.
Are there industries more prone to mismanagement?
Not necessarily, but we do see more issues in declining industries, like traditional media. That’s where companies often make bad decisions trying to reinvent themselves. Sometimes the best strategy is simply to “act your age.”
Is your focus on shareholder returns at odds with other stakeholders, like employees or customers?
It doesn’t have to be. There’s a false dichotomy between serving shareholders and treating employees or customers well. Long-term shareholder returns come from fair and sustainable business practices. If companies treat their customers, suppliers, and employees fairly, then shareholders tend to do well. It’s not an either/or situation.
You said earlier that your top 5 holdings make up 50-60% of your portfolio. Can you disclose what those holdings are, in lieu of stock tips which I know you don’t like giving!
Sure, they are:
- COG Financial Services (ASX: COG)
- Fleetwood (ASX: FWD)
- Southern Cross Media (ASX: SXL)
- BCI Minerals (ASX: BCI)
- Magellan Financial Group (ASX: MFG)