Vertium Equity Income Fund
In partnership with Copia Investment Partners, new Australian equity income boutique Vertium Asset Management (Vertium) has launched the Vertium Equity Income Fund (the Fund), effective 24 July 2017.
The objectives of the Fund are to provide: greater income return than the benchmark yearly, lower absolute risk than the benchmark yearly, and greater total return than the benchmark on a rolling five-year basis.
Commenting on the launch, Vertium founder and chief investment officer, Jason Teh said: “At Vertium, we have one fund, one strategy and aim to do one thing very well. We aim to preserve retirement savings while delivering regular income, at the same time growing capital in a risk-controlled way so investors may have more for longer."
He added: “Unlike investors accumulating wealth, retirees broadly need: regular income – to cover living expenses and to keep pace with inflation, lower investment risk – to preserve capital and reduce the impact of market downturns, and capital growth – to ensure their savings can adequately sustain them over the long term. But, with living costs rising and people living longer, there is a real social and financial risk that retirees employing only an asset allocation strategy may outlive their savings. An equity income strategy has the potential to reduce this risk and become an integral part of a balanced retirement investment portfolio."
"Search for the truth and weed out false narratives": Q&A with Vertium founder & CIO Jason Teh
- What do you think is the biggest investment challenge facing retirees?
The biggest challenge, I believe, is that retirees outlive their savings. There are several ways this could happen:
- As a society, we are living longer.
- Retirees’ savings could shrink in value from:
a. drawing down too much
b. their underlying investments performing poorly.
Rather than living on less, I think it’s important retirees focus instead on ensuring their savings last as long as possible. I believe they may be able to do this if they can achieve the following three objectives from their investments:
- More income: to minimise their drawdowns
- Less risk: drawing down on low-risk investments relative to high-risk investments may help preserve their capital
- Greater return: to grow their capital base over time which can help keep pace with rising living costs
- What is your investment philosophy and has it evolved over time?
My investment philosophy is based on three principles:
- Markets are rational most of the time
- Mispricing occurs with emotions
- Margin of safety is critical
When I first started, I thought working hard was the secret to stock picking. But I realised over time, no matter how hard you work, you can still be wrong. The market is not easy to beat otherwise every second stock I look at would be a bargain.
Over time, I learned I was better at defence (identifying mistakes made by the market), rather than offence (finding the next big theme). Hence, my investment specialty has been to focus on areas in the market where emotions are heightened and where mistakes are more likely to happen. Specifically, I try to identify bathwater babies (market overreaction to negative fundamentals) and neglected orphans (market underreaction to positive fundamentals) and avoid value traps (market underreaction to negative fundamentals) and expensive stocks (market overreaction to positive fundamentals). It’s the combination of what you own and don’t own that determines performance outcomes.
Further, to help minimise my own mistakes, I approach investing with a margin-of-safety framework when I capitalise on mispriced stocks. Capitalising on mispriced stocks with a margin-of-safety framework is the best way I know to preserve capital and still deliver a reasonable return over the long term.