Following the Fund Managers
You may have seen my article on Livewire this weekend which talked about some of the common traits and mistakes, as well as the heroics we see when we do portfolio assessments for financial planning clients, mostly portfolios that have been managed by SMSF Trustees in isolation. Our portfolio assessments provide people with a bouncing board, an objectivity they might not achieve alone, which allows them to see themselves in context.
One of the heroic portfolios we did this year I labelled “The Margin Loan Portfolio” and you can read about it by clicking on the image below. This is the portfolio managed by one of our members who was sleeping on his mother’s sofa in 2010, divorced and penniless with no more than $30,000 in a margin loan. Last year that portfolio was worth $3.47 million.
You can read about some of his techniques in the article above or by watching my video on Livewire.
One of his processes included “Following the Fund Manager”. Last year for instance he took an article we wrote in Marcus Today about the top performing fund managers and went through the websites of the top 22 performing fund managers in the article and downloaded the most recent monthly or quarterly reports and noted down the top holdings for each fund (if they disclosed them). These are his notes from September last year (unfortunately just before the market correction):
The observant amongst you will notice the summary of his portfolio at the bottom which shows a 51.78% total return compared to his chosen (but rather unnecessary) benchmark – the STW 200 Fund which is an ETF that matches the ASX 200 index.
Having made this list he then tried to cross-reference which fund managers were holding the same stocks. So for example if Afterpay was held by 5 managers that was a tick. As a second filter he then checked those stocks for trend on the chart and if they were going sideways or down they were culled from the list.
Along the way he read the fund manager reports and if a stock seemed particularly interesting he would do some more research on them. If it was a bank or miner then he mostly wasn’t interested – his goal was to identify growth.
Finally to gain some more advantage he then cross-referenced his margin loan website to see where he could get leverage if any, as that meant a smaller capital allocation for potentially the same return.
He says “the net result of all that work was that I didn’t do very much – probably only a few investments came out of it – but the big lesson was seeing that I was holding or already noticing the same things as the fundies (eg Aristocrat, Appen, Altium, Afterpay) so that was a tick that didn’t need anything to be changed. The work was worthwhile as it served to add more mortar between the brick walls I was building.”
So, for those of you that would like to emulate this technique, here, to keep you busy over Christmas, is a list (from Morningstar) of the top-performing actively managed Australian equity funds that focus on growth. The list has been filtered by annualised return over the last three years being more than 10%. I could have done it over 5 years or 10 years, but this is the best annualised returns over 3 years. You can take this list and check out the fund manager websites and see what they’re up to and what they’re holding. I don’t have the time to do it for you, but if anyone does the work please send me your notes.
Yield is the the percentage of the current price of the fund or ETF that was paid to investors in the previous year:
Here are descriptions of some of the top funds: