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We invest in a portfolio of global small and mid cap international companies.
Taking a bottom-up approach to investing we undertake deep fundamental research of both the quantitative and qualitative aspects of investee companies.
Our strategy is benchmark unaware because we believe this unconstrained approach allows maximum flexibility to pursue attractive risk-adjusted investments.
Our intention is to hold high-quality businesses that generate attractive returns on capital employed through a full market cycle, with low levels of debt, managed by highly competent and aligned executive teams.
We aim to achieve annualised returns, in excess of the MSCI World SMID Index (after all fees and expenses) measured over a market cycle, which we consider to be seven years.
Number of Stocks
30–40
Market Capitalisation
US$500m – $40bn
Style
Long-only quality
Objective
Benchmark +3% (estimated 8–12% p.a. through the cycle)
Benchmark
MSCI World SMID AUD (Net)
Responsible Entity
The Trust Company (RE Services) Limited part of the Perpetual Group
Administrator
Apex Fund Services
Auditor
Ernst & Young
Fairlight’s investment strategy is executed with an ethical mindset.
We use hard exclusion screens to eliminate harmful industries, such as tobacco, armaments, gambling, alcohol and mining.
Each of the companies we research is also scored across a range of environmental, social and governance (ESG) metrics. These generate a cost of capital charge that is an input into a company’s valuation. Companies with relatively poor ESG practices incur a larger discount rate than those that are best practice.
We practice active ownership by engaging with companies on ESG issues (including disclosure) and voting our proxy rights.
Stock Profiles
While our judgement of Nordson’s latest deals may prove overly pessimistic, it is informed by a plethora of studies which show that acquiring relatively larger businesses from sophisticated sellers is statistically more likely to destroy value. Selling a beloved stock is never easy but can often be necessary to manage portfolio risk.
Stock Profiles
Often cyclical concerns cause entire sectors to fall out of favour, and when this happens, the share prices of even the most admired companies come under pressure. Earlier in July, widespread concerns about new housing construction in the US provided Fairlight with an opportunity to purchase shares in Pool Corp at a relatively attractive valuation.
Investment Philosophy
Artificial intelligence (AI), in its more modern ’generative’ form (GenAI), is the latest example of a new technology that has the potential to fuel a new wave of competitors eager to disintermediate the current market leaders. We have thus spent significant research time to understand the potential threats and opportunities for our companies.