K2 Australian Small Cap Fund investment philosophy
At K2, we focus on delivering superior risk adjusted returns for our clients over the long term. We invest in equities to generate positive returns and aim to preserve our clients’ capital when market conditions change.
K2 has a flexible investment style as we believe that there is no one uniform cycle across the investment universe. By adopting the most appropriate style (for example, growth, value, momentum or income) that is best suited to the current market conditions allows K2 to maximise risk-adjusted returns. Investment opportunities can come from any number of areas and as a result K2 incorporates top down macro-economic analysis with bottom up stock selection.
Each of K2’s experienced investment managers brings their own investment style and methodology to our portfolios, combining their individual research with direct contact with companies. Investment managers are encouraged to invest autonomously and pursue investment opportunities within a well-documented framework. As a result, K2’s portfolios tend to be high conviction and index unaware. The investment team will always examine key investment variables, however, it is the team’s ability to identify major investment themes and catalysts on a timely basis that gives K2 its competitive advantage.
In addition to identifying undervalued stocks, K2 has the ability to actively manage equity market exposure and currency exposure as well as having the ability to short sell. These provide K2’s portfolio managers with additional tools to deliver superior risk adjusted returns for our clients.
The K2 Australian Small Cap Fund seeks to add value by investing in mis-priced stocks, where a company’s fundamental value has not yet been recognised by the market.
K2's assessment of a company's management, industry structure and valuation leads to investments in high quality companies in industries with structural growth or which have barriers to entry for competitors.
The portfolio is constructed primarily via a bottom up investment process which identifies K2's highest conviction ideas. If there are limited opportunities in the equity market the fund will hold cash until profitable opportunities are uncovered.
Investment Process
The K2 Australian Small Cap Fund seeks to add value by investing in mis-priced stocks, where a company’s fundamental value has not yet been recognised by the market.
K2's assessment of a company's management, industry structure and valuation leads to investments in high quality companies in industries with structural growth or which have barriers to entry for competitors.
The portfolio is constructed primarily via a bottom up investment process which identifies K2's highest conviction ideas. If there are limited opportunities in the equity market the fund will hold cash until profitable opportunities are uncovered.
Management quality is assessed via:
- Track record
- Execution of business strategies
- Capital Management
- Alignment of interests with shareholders
|
Industry Structure is assessed via:
- Growth outlook, supply and demand
- Barriers to entry, potential competition
- Regulatory environment
- Substitutes
- Pricing Power
|
Valuations are monitored on a relative basis with EPS growth and PER forming the criteria for determining current value and identifying when the intrinsic value assessment is reached.
In assessing intrinsic value, stock liquidity is a key consideration. As a high conviction portfolio with an ability to hold cash, monitoring valuations helps set realistic price targets.
Performance Since Inception
Past performance is not a reliable indicator of future performance. View Full Disclaimer.
Sector Equity Exposure
Graph represents sector equity exposure as at 30/09/2024
KSM Daily Pricing Performance