The Perpetual Equity Investment Company Limited (the Company) offers investors access to a portfolio of predominantly high quality Australian and global listed securities, selected by Perpetual Investment Management Limited (the Manager), one of Australia’s most experienced fund managers, and managed to provide regular income and long-term capital growth.
The Company listed on the ASX as a listed investment company (LIC) on 18 December 2014. Primarily, the Company will invest in quality listed securities. Its investment portfolio will be managed by the Manager.
The Manager will undertake the active management of the Company’s Portfolio, predominantly Australian listed securities with typically a mid-cap bias and cash, deposit products and senior debt, together with opportunistic allocations to global listed securities.
The Company will provide investors with the opportunity to invest in an actively managed portfolio and to gain access to the investment management experience and expertise of the Manager in a listed company vehicle. The Company will benefit from an experienced and proven portfolio manager, who will leverage the full resources of the large equity team of the Manager. The Company will also benefit from the significant broader expertise of the Manager, including operational and marketing support.
The investment objective of the Company is to provide investors with a growing income stream and long-term capital growth in excess of its Benchmark over minimum 5 year investment periods.
The Company’s Benchmark is the S&P/ASX 300 Accumulation Index. Since the Company may invest in global listed securities, the Company will have exposure to different investments to the Benchmark. Although a key tenet of the Company’s investment strategy is to provide the Manager with the flexibility to add value by investing in global listed securities, the Company has chosen the above Benchmark to reflect what the Company believes is the opportunity cost of alternatively only investing in Australian securities. This benchmark is intended to focus the Manager on global investment opportunities that add value above the Australian equity market return and focus the Manager on assessing global securities on a risk adjusted return basis from an Australian investor’s perspective.
FOUNDATION OF THE COMPANY’S INVESTMENT STRATEGY
It is the Manager’s view that the Australian equity market provides a concentrated exposure to the financials and materials sectors, with reduced opportunity in potential global growth sectors such as healthcare and information technology. The Manager also believes that Australian investors are frequently under-invested in global securities, and therefore may have less opportunity to benefit from global diversification.
The Manager believes that opportunities will exist to purchase global listed securities at potentially cheaper valuations from time to time relative to Australian listed securities. Given the Manager has proven expertise and experience investing in Australian and global listed securities, the foundation of the Company’s investment strategy rests on the benefits of a flexible mandate, across both Australian and global listed securities.
The Company’s investment strategy is to create a concentrated and actively managed portfolio of Australian securities with typically a mid-cap focus and global listed securities. The mid-cap focus refers to a typical preference for Australian listed securities outside the top 20 listed securities by market capitalisation. The allocation to global listed securities will be opportunistic in nature and any global listed securities are not expected to have any consistent capitalisation bias, but will typically be larger and more liquid than comparable Australian entities. The investment strategy will take a high conviction approach, with a flexible mandate, offering a value and quality focus across both Australian and global listed securities. Whilst the portfolio will be concentrated in typically 20-40 securities, the Manager will diversify the portfolio across industry sectors and offshore investments.
Up to 25% of the Portfolio’s net asset value may be held in cash, deposit products and senior debt with less than one year to maturity (including any exposure to such investments gained by investing in managed funds). The level of cash, deposit products and senior debt directly or indirectly held within this limit will be determined by the attractiveness (based on the value and quality) of available securities. The Manager expects that maximum levels of cash, deposit products and senior debt directly or indirectly held will only be approached as securities markets become very expensive.
The following table summarises the highlights and benefits of the key aspects of the Company’s investment strategy.
Key aspects of the Company's investment strategy
Highlights of these key aspects
Core of quality Australian securities
The Manager has a proven track record of investing excellence in equities
Access to the Manager’s proven investment philosophy & process
Identify quality securities based on the Manager’s 4 quality filters
Proven equities experience
Up to 35% invested in global listed securities
Opportunity to add returns above the Benchmark return and diversification
Leverage the Manager’s experience and expertise globally, with proven performance in global listed securities
Local manager, with the Australian investor in mind
Opportunity to add returns above the Benchmark return
Up to 25% cash, deposit products and senior debt (including any exposure to such investment gained by investing in managed funds)
Flexible mandate to vary Portfolio’s exposure to equity market risk
Exposure determined by the attractiveness and availability of securities
Flexibility to manage downside risk
The Manager will undertake fundamental, in-depth, bottom-up research to identify high quality and attractively valued securities using the Manager’s disciplined investment process. The fundamental bottom-up analysis utilised by the Manager is an investment process that focuses on identifying the quality and value of an entity through its fundamental value drivers.
The investment process first assesses companies on four key quality criteria:
- Sound management
- Conservative debt
- Quality of business
- Recurring earnings (where applicable).
The companies are then valued according to the differing nature of their business, and the securities are ranked from 1 (strong overweight) to 5 (sell). The portfolio manager then utilises the rankings and their own judgement to construct the Portfolio.
The Manager’s investment philosophy for this disciplined investment process has not changed for more than a decade. The Manager remains true to its investment philosophy through all market cycles.
The key investment guidelines for the Manager’s implementation of the Company’s Investment Strategy are summarised below:
|OBJECTIVE||The investment objective of the Company is to provide investors with a growing income stream and long-term capital growth in excess of its Benchmark over minimum 5 year investment periods.|
|BENCHMARK||S&P/ASX 300 Accumulation Index.|
|NUMBER OF SECURITIES||As a guide, the Company will hold between 20 to 40 securities.|
|MAXIMUM INDIVIDUAL SECURITY LIMITS||Maximum 15% of the Portfolio’s net asset value.|
|AUSTRALIAN LISTED SECURITY LIMITS||50 -100% of the Portfolio’s net asset value.|
|GLOBAL LISTED SECURITY LIMITS||0 - 35% of the Portfolio’s net asset value.|
|CASH, DEPOSIT PRODUCTS AND SENIOR DEBT LIMITS||0 - 25% of the Portfolio’s net asset value may be held in cash, deposit products (including term deposits), and senior debt with less than one year to maturity (including any exposure to such investments gained by investing in managed funds).|
|CURRENCY HEDGING||The Manager considers currency valuations at the entity level when analysing securities, however, typically expects that the Portfolio will be unhedged. Currency exposures may be hedged defensively where the Manager sees significant risk of currency weakness, but no attempt is made to add value to the Portfolio by actively managing currency.|
|SHORT SELLING||Not permitted.|
|DERIVATIVES||Permitted (see Section 3.7 of the Prospectus).|
|UNLISTED SECURITIES||The Company can hold up to 10% in unlisted securities, on condition that these securities are proposed to be listed on any recognised global (including Australian) exchange within 12 months.|
|BORROWINGS||Borrowing does not form part of the investment strategy of the Manager, however, the Company retains the right to leverage up to 10% of the Portfolio’s net asset value at the Board’s discretion.|
|MAXIMUM HOLDING IN ANY PERMITTED INVESTMENT||The Company may not own more than 10% of any entity in which it is invested.|