Research house Morningstar has upgraded SG Hiscock’s SGH ICE Fund to ‘Silver’ and maintained its ‘Neutral’ rating of the SGH20 Fund in its latest review*.
In its review of the SGH ICE Fund, Morningstar said: “The Fund is a solid strategy, and our enthusiasm for it has continued to grow.
“The Fund was recently awarded the 2015 Morningstar Fund Manager of the Year for Domestic Equities – Australian Small Caps and is definitely a candidate for those looking for a strong choice in the small-cap space.
“The investment objective of the Fund is to deliver superior medium to long term returns by investing in listed companies which possess a sustainable competitive edge.
“The portfolio tends to steer clear of areas such as mining, property, and basic manufacturing, opting instead for a range of industries such as healthcare and technology. Stocks that make the initial grade are assessed on where they sit in one of three phases within the life- cycle spectrum–establishment, growth, or peak cash generation.
“The strategy has consistently beaten peers over most periods and looks even better on a risk-adjusted basis.
“Whilst most active small-cap managers have made light work of beating the small ordinaries index over the past few years, SGH ICE has also convincingly outpaced the Australian Equity Mid/Small Growth Morningstar Category average as well producing top-quartile returns over one, three, and five years to 31 October 2015.
“Recent performance has continued to impress. In the last 12 months to October 2015, the strategy returned 19.71 per cent versus the S&P/ASX300 return of negative 0.52 per cent.”
Callum Burns, portfolio manager of the SGH ICE Fund, said the aim of the fund is to invest in firms with the traits of a quality franchise, such as owning assets that are hard to replicate, having an entrenched market position or demonstrating pricing power.
In its report on the SGH20 Fund, Morningstar said it was “very different from the crowd”.
“SGH20 is a reasonable way to get punchy, atypical exposure to Australian equities,” Morningstar said.
“The philosophy behind SGH20 is that building a concentrated portfolio which ignores the index and focuses purely on stock selection, will deliver superior long-term total returns.
“It usually has sector exposures that differ substantially from the S&P/ASX 200 Index. For example, though its financial services allocation has risen since 2013, it has often been half the market’s allocation or less. And it often has much more invested in mid and small caps than its average peer. Its active share is typically 70 per cent –90 per cent, which is very high for this benchmark-conscious sector.
“The strategy is far ahead of the market during the trailing one-year period. It gained 7.6 per cent while the index lost 0.7 per cent,” Morningstar said.
Robert Hook, portfolio manager for the SGH20 Fund, said it is a high-conviction fund, investing in 15 to 25 companies. The portfolio is not constrained by index or sector weights, and aims to achieve a return in excess of 5 per cent above both the Cash and the S&P/ASX300 Accumulation Index over rolling five year periods.
For more information please contact:
Phone: 03 9612 4650
Phone: 03 9612 4620
*Reports dated December 2015