Investors are in luck, as one of Australia's most interesting fund managers has packaged up their flagship fund for listing on the ASX.
Some investors may recognise Forager Funds as the name behind the blog entry Dick Smith is the Greatest Private Equity Heist of All Time, which created quite a stir in financial media last year.
Forager's main fund, the Forager Australia Shares Fund (ASX: FOR) is set to list on the ASX today. The fund is a value fund, with considerable flexibility in its investment approach.
Forager buys companies that are trading at a significant discount to their estimate of 'intrinsic' value, and then waits for the market to recognise the difference and revalue the stock. Occasionally they'll attempt to help the process along a little via their blog.
The Forager Australia Fund generally concentrates in a small number of companies, rather than spreading itself widely and effectively hugging the index as so many managers do. Management also has the discretion to hold as much cash as they think necessary. This increases the potential volatility of returns significantly, but should also ensure that – for good or for ill – the returns don't hug the index.
It's been a decent strategy so far, with average returns of 13.7% per annum well ahead of the All Ords 6.92% per annum (including dividends) since inception ~6 years ago. Fees are low at 1.1% per annum, with a 10% performance fee on returns greater than 8% per annum. Probably the best part is Forager's accessibility, with its reports and blog entries written in everyday English, not the technical dialect of a 'fundie' that we see so often.
The downside is that the fund will own just about anything at the right price, even businesses that might be described as 'garbage' by many others in the investing world. This is in part how they generate their out-performance, by getting a good price for companies that nobody else wants. It's not a strategy that will sit well with every investor, and this type of fund could very easily under-perform the index for an extended period of time.
Their track record is nothing to scoff at however, and with the Forager Australia Shares Fund set to launch later today, readers will get the chance to see for themselves.
