"In many ways old is new again": Q&A with Kim Ivey on his new venture

It all came about when speaking with Tim Cheung (LSL Partners' CIO) early last year and realising we could build a differentiated investment management business focusing on Asia, which is both rich in opportunities and severely misunderstood by investors and most of our peers.

LSL Partners cannot be replicated by computers, ETFs or black boxes. As such, we have to find the right people, with the right skills, and deploy them in the right environment in order to achieve our goals. Our immediate goal is building a robust infrastructure in Sydney around Tim and his team, who are managing our first fund, The Fury Fund, which will be a long/short equity fund investing in Asia linked stocks. In 2019, we aim to open a Hong Kong office, move additional investment and investor relations staff there and look at a new investment product that builds on LSL Partners' company and sector analytical skills, probably in the debt and/or credit space.

"LSL Partners cannot be replicated by computers, ETFs or black boxes. As such, we have to find the right people, with the right skills, and deploy them in the right environment in order to achieve our goals."

Our investment thesis is not based on any particular style (i.e. value, growth, thematic...) but rather on identifying a current mispricing in assets (equity, bond, property...) through intensive, fundamental research. This evidence based approach is often used in private equity investing, but has lapsed by the wayside in public market investing. Naturally, this philosophy can only be deployed in an absolute return framework as both the stock selection and portfolio construction is uncorrelated with any particular market index or benchmark.

Long term market conditions alone, up until recent weeks, have not provided many investors with compelling justification to reassess their strategy allocations. Many of them have been lulled by cheap and abnormally high market linked returns over the past 2-3 year and have not been looking at what future conditions will most likely be. I think the more sophisticated investors began selling down their traditional "beta" investments starting late last year. In Australia, outside of the Future Fund, a couple of large public super funds, and some independently advised dealer groups, most Australian investors are woefully underweight to sources of return that are uncorrelated with rising markets.

One of our favourite stocks for some time has been NetEase. NetEase is the world's largest desktop and mobile gaming company. We believe the company is capitalising on a willingness of cashed up younger consumers in China to spend their leisure dollars. NetEase's top games are typically highly immersive and massively multiplayer online roleplaying games. Through player surveys, we found the company engenders phenomenal loyalty and can gross north of AUD1 billion per year. The company's 2016 standout hit, Onmyoji, actually cracked the top ten mobile apps by revenue generation in Australia, a phenomenal feat for a Chinese language title.

One of the areas we have significant short exposure to is also on the gaming side, through two Macau VIP focused gaming companies. Last year saw a significant rebound in the fortunes of junket operators after the industry faced a liquidity crisis and a period of rapid consolidation in 2015 and 2016. As the cyclical tailwinds of that reflation lapses, we see things getting relatively tougher for VIP focused operators. Regulatory risk for the VIP focused casinos is also elevated with capital controls still front of mind in China. This is the type of short that is best undertaken with constant checks of industry conditions - which plays to LSL Partners analytical strengths.

In many ways old is new again with the Fury Fund. Its strategy is based on a traditional stock picking process that looks to profit from both the long and short sides. Where we find too much unintended sector, country or market exposure through the aggregation of individual stock positions, these are hedged out through ETFs. Net market exposures are kept fairly low (+/- 25%). As simple as this strategy sounds, what sets the Fury Fund apart from our peers is our willingness to take a fundamental, evidence based approach, particularly on the short side, and demonstrate the conviction of our calls.

I think without a doubt it has been the opportunity to interact with some of the most engaging and capable people in the investment industry. I have either been advising or building investment businesses since I started Australia's first market neutral hedge fund (Vertex Capital Management) in 1998 and that was after a career in banking, funds management broking and asset consulting! The alternative investment industry flourishes on innovation and change, and it is the people who come together at these intersections that makes this industry so rewarding.

We need to be happy in order to flourish in life. What is happiness? It's when what you feel, what you think and what you do, are all in harmony.

Always start with the buyer of your product or service. Find something that she/he really needs and find out why it isn't being produced. First start with the "why" then move on to the "what" and the "how".

Good question. We operate in a very competitive and stressful industry that often measures success in terms of monetary units. It can be a dehumanising measure.

I tend to gravitate to pursuits that are both active and that I find rewarding spiritually. I co-founded an NPO called Hedge Funds Rock( HFR) in 2002 with a group of like-minded friends who all wanted to help others outside our industry. HFR continues today. A board of industry volunteers organises an annual awards dinner to raise money for kids and families facing life threatening diseases. It's been a huge success and we are now transforming HFR into a charitable foundation in its own right.

Other times balance can come from more remote means. My wife and I have maintained a home in Broome WA since 2010. It's a fantastic part of Australia, one that replenishes the soul by just being on country. I have always been interested in helping our First Australians, so I soon began working with the traditional owners in the West Kimberley to help build and fund their social programs in housing, employment, language, education and land management. Balance, for me, comes from seeking interaction with people in and outside of the industry who you admire, respect or just want to help.