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| Fund Overview | Paragon's unique investment style, comprising thematic led idea generation followed with an in depth research effort, results in a concentrated portfolio of high conviction stocks. Conviction in bottom up analysis drives the investment case and ultimate position sizing: * Both quantitative analysis - probability weighted high/low/base case valuations - and qualitative analysis - company meetings, assessing management, the business model, balance sheet strength and likely direction of returns - collectively form Paragon's overall view for each investment case. * Paragon will then allocate weighting to each investment opportunity based on a risk/reward profile, capped to defined investment parameters by market cap, which are continually monitored as part of Paragon's overall risk management framework. The objective of the Paragon Fund is to produce absolute returns in excess of 10% p.a. over a 3-5 year time horizon with a low correlation to the Australian equities market. |
| Manager Comments | Positive contributions in the month were from Global Geoscience and the Fund's shorts in Invocare, IPH, Ramsay Health (all downgrading), IOOF, Telstra and the Fund's bond proxies. These were offset by declines in Orocobre, CleanTeq, Challenger, Janus Henderson, Agrimin and Echo. The Fund ended the month with 32 long positions and 19 short positions. In their latest report, Paragon briefly discuss the rapid sell-off of bonds at the start of 2018 which triggered higher volatility and a roughly 12% correction in US stock markets - the first >10% correction in two years. Paragon believe the current correction is well and truly overdue, and that rising bond rates and their rate of change will continue to drive increased volatility over 2018. Paragon also noted that, in light of the fact that several of the Fund's key high-conviction long positions carry higher volatility in periods of market stress, Paragon has a flexible mandate and is active with exposure, having the ability to hedge and shift to a higher cash position (currently 35%) when appropriate. |
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