Lonsec awards ‘Highly Recommended’ to SGH ICE Fund

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MEDIA RELEASE: Lonsec has awarded a ‘Highly Recommended’ rating to the SGH ICE Fund for the fifth year in a row. The rating indicates that Lonsec has very strong conviction the financial product can generate risk-adjusted returns in line with relevant objectives. 

SGH ICE portfolio manager, Callum Burns, said for the year to September the Fund was pleased to deliver a positive return and grow clients’ wealth in a market where the key market indices delivered material declines.

“Our franchise process has been proven over the long haul and we remain focused on executing our franchise strategy for the benefit of clients,” he said.

The SGH ICE Fund aims to deliver positive long-term returns by investing in a portfolio of predominantly mid to small cap Australian equity industrial ‘franchise’ businesses. Franchise companies are those that display a sustainable competitive advantage due to owning assets that are difficult to replicate, operating those assets with the objective of entrenching the company’s market position, augmented with a distinguishable moat. 

“Companies with these attributes typically deliver more sustainable earnings growth,” Mr Burns said.

In its research report, Lonsec noted that the strengths of the Fund include portfolio manager, Callum Burns, who is a “high calibre investment professional”, and architect of the strategy. It said the Fund had a well-structured investment process that combined a focus on ‘franchise’ investing with strong valuation discipline, and a robust portfolio construction framework. 

It also noted the investment team has a strong alignment of interests with investors. 

“The Manager has established a broad research universe of companies for consideration,” Lonsec said. 

“This comprises the S&P/ASX Indices plus ideas generated from the Manager’s network of contacts (corporate contacts, personal contacts, brokers, competitor companies, investment reading and quantitative diagnostics). This universe comprises approximately 450 stocks and is much wider than a typical small cap investment manager in Lonsec’s peer group. 

“The Fund is managed in a ‘benchmark unaware’ manner and has a ‘GARP’ and ‘quality’ bias. The Fund is well-diversified (approximately 40 stocks at present), with portfolio turnover typically being 30-60 per cent p.a. 

“The Manager expects the Fund’s returns to be delivered with less volatility (as measured by Standard Deviation) than the Index and this has been achieved.” 

The Lonsec report concluded the Fund’s ‘franchise’ approach was logical, highly repeatable and embedded a robust sell discipline in the research process. The report also highlighted the attractive ‘boutique’ structure, which included a strong alignment of interests with investors.