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| Fund Overview | The investment process involves a combination of top-down analysis with fundamental bottom-up qualitative and quantitative research to derive a risk-adjusted discounted cash flow (DCF) valuation of companies in the target universe. The investment team will generally buy stocks from the pool of securities that are trading below Loftus Peaks' valuation and sell them when they are trading above Loftus Peak's valuation. The approach allows for both fundamental accounting information as well as market-oriented inputs to be factored into the portfolio construction process. Loftus Peak's model typically does not rely on leverage to deliver investment returns and specifically takes into account risk in the valuation process. Capital preservation can be managed by holding up to 50% cash. Index and currency options and futures may also be used to manage risk. |
| Manager Comments | In reference to the market's performance in October, Loftus Peak noted it is never the case that stock market performance is linear. They therefore used the weakness in October to add to a number of key strategic holdings at low prices, starting the month with 10% in cash and finishing with 2%. The Fund is 98% invested in 24 holdings which the manager considers likely outperformers. Key detractors included Nvidia, Tencent, Alibaba, Amazon and Qualcomm, whilst on the positive side Tesla performed well on the back of US$1.4b of operating cashflow in the quarter. Loftus see the falls in Tencent and Alibaba to be the result of the impact of tariffs on China, whilst they believe the fall in Amazon was expected after some very aggressive price targets. They believe Nvidia to hold an important role in machine learning and global data centres, and thus remain invested. They also see Qualcomm as being key in the roll out of the 5G network, which is why they continue to invest. In addition, the Australian dollar depreciated 2.05% over the month against the US dollar, which meant the value of the Fund's US dollar positions increased. As at 30 October 2018, the Portfolio carried a foreign currency exposure of 99%. |
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