Benefits of investing in the PM Capital Australian Companies Fund

• Capital growth provided by a demonstrated, focused, patient and considered process honed over 30 years - with some short term volatility
• Access to a unique portfolio of Australian equities with additional global exposure, powered by domestic and international market insights
• A long term approach comfortable with investing in the Fund over the long term (7 years plus) with some short term volatility
• Diversity: the Fund provides opportunities in the Australian market significantly different to those provided by the index and more traditional Australian equity funds.

Risk level

Very High

Investor suitability

The Fund may be appropriate for investors seeking capital appreciation over a seven plus year investment horizon.

Capital Growth, Satellite/small allocation (<25%)  

About the Fund

The Australian Companies Fund aims to create long term wealth through a handpicked portfolio of 15-25 companies, most based in Australia, we believe are trading at prices different to their intrinsic values.

Investment objective

The Fund's objective is to provide long term capital growth and outperform the greater of the S&P/ASX 200 Accumulation Index or the RBA cash rate over rolling seven year periods. The Fund is not intended to replicate the index, investing in a concentrated portfolio of predominantly undervalued Australian equities, with the added attraction of some exposure to PM Capital's global best ideas.

The Fund uncovers and profits from market anomalies in Australia, but also applies global market anomalies to the Australian market.

Investment philosophy

We aim to build long term wealth together with our co-investors by finding and exploiting investment anomalies around the world. Using a focused, patient and considered approach to finding simple investment ideas produces the best environment for creating that long term wealth.

Our experience has shown us that while the market is largely efficient, it can, and regularly does, misprice a small proportion of companies. This mispricing can arise as a result of any number of reasons, but is most often associated with disruptive or cyclical change, new information which is misunderstood by the market as having a permanent impact when it is in fact transitory, or just because they are operating in a sector out of favour with investors.

Our unique process is based on scanning the world for those companies (hence the radar in our logo), discovering the associated valuation anomalies and extracting value from them. We buy good businesses at a good price; businesses that we believe are being valued differently to their long term intrinsic value, but will return to their correct value over time.

How we invest your money

The Fund is a focused portfolio, with its listed equity component typically comprising 15 to 25 predominately Australian equity market securities.

The allowable assets include (but are not limited to) listed and unlisted Australian and global securities, interest bearing debt securities, managed investment schemes, derivatives (both exchange traded and over the counter (OTC) - for example swaps, options, futures, forwards, credit derivatives/credit default swaps, etc), deposit products and cash.

Investment guidelines

• Individual securities positions will be reduced if they exceed 10% of the Fund's Net Asset Value.

• Individual direct short positions (excluding index shorts) may be initially sold up to a limit of 2% at market value, and will be reduced if the position exceeds 3%. The Fund may have a maximum of 30% in direct shorts (being shorts that are not paired against a corresponding long position);

• Derivatives (exchange traded and/or OTC) may be used for hedging, to increase or reduce the effective invested position, or to create new positions;

• The Fund may hold up to 30% of Net Asset Value in interest bearing debt securities issued by the Australian government or Australian corporates (including those issued overseas by Australian corporates);

• The Fund may hold up to 100% in cash or cash equivalent investments;

• The Fund may hold up to 20% of Net Asset Value in global listed securities. This limit does not include exposure gained via an investment in Australian company securities which are dual- listed on an overseas securities exchange;

• The maximum gross leverage of the Fund (being longs + shorts + debt securities) is 170%, and the maximum net leverage of the Fund (being longs - shorts + debt securities) = 130%;7

• The maximum net equity exposure (including derivative exposure to equity indices) is 110% (defined as long equity minus short equity), and is calculated on a net effective, option adjusted basis;

• The Fund may purchase up to 10% of its Net Asset Value in Australian unlisted managed investment schemes (MIS) and/ or global equivalents. These other MIS may be issued by PM Capital or a third-party issuer;

• Currency exposures due to equity investments may be hedged at the Investment Manager's discretion. Currency exposures due to investments in debt securities will be hedged as far as practicable. Accordingly, the Fund (subject to its investments) may remain partially or fully exposed to any one or more of the currencies of the various global domiciles in which the Fund may directly invest, and/or be indirectly exposed to. The Fund may enter into option contracts (and/or FX hedges) with the intent to protect the purchasing power of the Fund from the depreciation in the Australian dollar.

Asset allocation ranges

• Australian listed equities: 0-170% (gross) 0-110% (net)

• International listed equities: 0-20%

• Australian government bonds: 0-30%

• International corporate bonds Australian corporate bonds (including tradeable loan securities): 0-30%

• Exchange-traded derivatives: 0-100%

• Other - International/Australia (including unlisted unit trusts (MIS) and other instruments): 0-10%

• Cash, term deposits, and cash equivalent investments: 0-100%