It has produced a three-year return of 14.1 per cent per annum, although over 12 months it is down 10.1 per cent, compared to a 13.3 per cent fall in the Small Ordinaries Accumulation Index. But this is not the fund’s benchmark; unusually, it has a fixed benchmark of an 8 per cent return, which Ivers says reflects both the long-term rate of return an investor can expect from the market and a desire to generate absolute returns for investors.
Not tracking an index creates a different approach to risk management. There is no attempt to look at stock weightings and manage risk, and instead Ivers and Younger focus on the risk/reward characteristics of their stocks.
The starting point is a GARP (growth at a reasonable price) approach that is a mix of value and growth investing, and a criteria that every stock must be able to deliver a 10 per cent annual return. Then the fund balances larger positions in what it believes are lower-risk picks that can perform regardless of conditions, with smaller positions in more cyclical ideas.
“We’re trying to balance a pretty conservative portfolio with not going completely all in on defensiveness.”
The key remains those company meetings and continuing to look at stocks over and over again, so that when conditions change – inflation rises, or COVID-19 hits, or profits weaken – the fund is ready to buy.
Ivers’ advice in volatile markets is simple: “Just look past the short-term noise and focus on the fundamentals of the stocks you own and where they’ll be in a few years’ time.
“And don’t worry too much about the movements day-to-day. It’ll drive you crazy.”