Airlie Funds Management, is an active bottom-up investor that employs a prudent, common-sense investment approach that identifies companies based on their financial strength, attractive durable business characteristics and the quality of their management teams. Airlie invests in these companies when their view of their fair value exceeds the prevailing market price.
"We don’t spend much time trying to pick where the market is going": Q&A with Airlie's Emma Goodsell August 2018
Deputy portfolio manager for the Airlie Australian Share Fund, Emma Goodsell, has very high praise for the group's founder John Sevior, whom she cites as a mentor and investing partner. She spoke to Industry Moves about how a concentrated approach to managing Australian equities can profit investors. After working in funds management for eight years, Emma also told us what she loves about managing money, including the intellectual challenge it provides.
- Can you explain the benefits of a concentrated approach to managing Australian equities?
We believe a concentrated portfolio of best ideas will outperform passive investment in an index, where you are able to stick to a solid, proven process of stock selection and avoid companies with too much debt, too high expectations or worsening fundamentals.
- Where does this type of fund sit in a retail investor's portfolio?
Whatever the makeup of a retail investor's portfolio, we believe there is room for a high conviction, concentrated active fund that aims to outperform the benchmark over the medium term.
- As well as some well-known large cap stocks, you also have a few smaller companies, like Z Energy and Bingo Industries, in your holdings. Is there more value to be found in these mid-sized companies?
Typically there is more value on offer but you need to be selective. We seek strong management, organic expansion opportunities and strong balance sheets.
- Do other managers focus too much on the larger companies on the ASX?
There is a lot of market noise around larger companies, however this creates opportunity - even the top 20 ASX listed companies have seen their values fluctuate by a third on average, over the last year. We focus on best ideas rather than market cap, but find slightly more value on offer among mid to small caps.
- You filter companies through four key investment steps, what’s the most important step of these four?
Each are critical in our process. We spend the most time on assessing business quality, as we are looking for directional changes in the business. However, we wouldn’t invest in a high quality business if it failed our financial strength test, had poor management or an extreme valuation.
- Do you consider ESG factors at all?
We consider ESG factors as part of our assessment of business quality, and quality of management.
- Can you share your outlook for the Australian equity market?
We don’t spend much time trying to pick where the market is going, but broadly we think domestic facing businesses face headwinds - a slowing housing cycle, regulatory/political risks plus disruption. At an aggregate level these risks aren’t reflected in stretched valuations, however we think there are pockets of opportunity.
- Do you have a mentor? What have they taught you?
John Sevior – whilst he’s more of an investing partner than a mentor, I’ve learnt the importance of discipline and integrity in everything you do from him.
- What do you like about managing money?
I find it rewarding to safeguard and grow investors wealth over time. Day to day, it’s a fascinating intellectual challenge where you get to meet interesting people.