Aurora Investment Trust plc - Intermediaries Offer - Cornhill Capital
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Aurora Investment Trust plc
Intermediaries Offer
This financial promotion has been approved by Phoenix Asset Management
Partners Limited ("PAMP") for the purposes of section 21 of the Financial
Services and Markets Act 2000 ("FSMA 2000"). PAMP is authorised and
regulated by the Financial Conduct Authority.
This document has been prepared for general information purposes only
and must not be relied upon in connection with any investment decision.
Potential investors should seek independent financial advice from a financial
advisor who is authorised under FSMA 2000 before making any investment
decision. The "Important Information" section at the end of this document
should be read in conjunction with this document.
www.aurorainvestmenttrust.comValue Investing
in Quality Stocks
Aurora Investment Trust plc is a closed-end fund that invests in
UK equities and trades daily on the London Stock Exchange. Since
January 2016 the portfolio has been managed by the specialist
investment boutique, Phoenix Asset Management Partners. Phoenix
have a unique, very focused approach to stock picking that has
beaten the FTSE All Share Index by 377.7% over the last 20 years.*
Overview The opportunity to invest in the Phoenix style has previously
only been available to professional investors in the offshore
Phoenix UK Fund. Now that Phoenix are investment managers
to Aurora, retail investors have easy access to the same
investment strategy.**
Phoenix was founded by Gary Channon in 1998. He was
inspired to create a fund management business using the
“value investing” principles of great US investors such as
Warren Buffett and Phillip Fisher. Over the last 19 years the
Phoenix style has evolved, now applying value principles to
buying a small number of high quality businesses, temporarily
cheap due to short term bad news.
All investment ideas are generated in-house. The research
is unique, aiming to understand what differentiates a great
business from an average one. This includes: mystery shopping;
competitor analysis; attending trade conventions; meeting
current and ex-employees; price tracking; product analysis.
Aurora has a fee structure which aligns Phoenix’s interests
with those of investors. There is no management fee. Instead,
each year, Phoenix earns one third of the outperformance above
the FTSE All Share. Investors are protected from subsequent
underperformance by a “clawback” mechanism.
*Data provided as at 31 May 2018. Performance figure relates to the Phoenix UK Fund
(an unregulated collective investment scheme unavailable to retail investors) which is managed with
the same investment strategy as the Aurora Investment Trust plc.
**Whilst the investment strategy is the same in all material respects, the portfolio holdings will not
necessarily be the same and investors in Aurora will have no exposure to the investment performance
of the Phoenix UK Fund. Please refer to the important information at the end of this document.
www.aurorainvestmenttrust.comPhoenix Investment
Track Record
Phoenix also applies the ‘value-investing’ approach followed by the Aurora
Investment Trust plc to the Phoenix UK Fund. Given the relatively short period
of time Phoenix have managed Aurora Investment Trust plc, for illustrative
purposes, the below chart shows the value of £1,000 invested at the launch of
the Phoenix UK Fund in 1998 to 31 May 2018, which is worth £6,720 today.
Annualised 10% return Value of £1,000 invested at launch of the Phoenix
(net) since inception in UK Fund to 31 May 2018
1998 vs. annualised
5.5% FTSE return
6,500
These returns relate to the offshore
open-ended Phoenix UK Fund only 5,500
and do not relate to the returns of
Aurora Investment Trust plc. Past 4,500
performance is not a guide to future
performance. 3,500
2,500
* Data from 30th April 1998, All-Share Index Returns
with dividends reinvested
1,500
500
1998 2001 2004 ipsum
2007 2010 2013 2016
PUK (Net) FTSE-All Share Index*
In relation to the Phoenix UK Fund, Winners and losers by value since 1998
Phoenix have made a total of 109
investments since launch in 1998.
This chart shows how many of those
ideas made a positive return
(“winners”) versus how many made
a negative return (“losers”). 20%
80%
Winners
Losers
www.aurorainvestmenttrust.comAurora’s Top Holdings
Share Price: £4.07
Top Stocks as at Aurora Phoenix Estimate of Value: £7.80
31 May 2018 Weighting
Tesco 11.2% Investment Case Research
Lloyds 9.6 % –– One of the best run retail –– Regular store visits in
businesses we have come the UK & Europe
across
GlaxoSmithKline 9.1% –– Observing: customer
–– 50%+ UK market share, service & shop keeping
Sports Direct 8.8% low cost producer standards
–– Highly aligned & –– Regular price checking
Randall & Quilter 7.9% experienced owner/ a basket of 14 goods vs.
operator main competitors
Vesuvius 6.1% –– Detailed investigation
of freehold purchases
Bellway 6.0%
Morrisons 5.0%
Hornby 4.0%
Share Price: £2.46
Redrow 3.8% Phoenix Estimate of Value: £4.00
Dignity 3.7%
easyJet 3.6% Investment Case Research
JD Wetherspoon 3.3% –– Lost focus on customers –– We have visited hundreds
& wasted money on of supermarkets asking,
OthersHow we do it We find great companies. We consider that the value of a company is the
amount of cash it will generate over its lifetime. We are drawn to companies
where this is easiest to estimate.
Often these will be companies with a strong business franchise and some
control over their profitability. We call this pricing power and it can come from:
strong brands; a leading market position; a unique product; lowest cost of
production; patents, etc.
We have a wide investment universe which means we are not
unnecessarily constrained by sector or size criteria. Our main concern is
whether we can understand and value the business and buy it cheap enough to
make great investment returns.
We look for businesses that earn a return on capital of at least 15%.
Most of the money generated by a business is re-invested. If we want our
investments to do well over the long term then that money needs to be
reinvested at high rates. A consistent high rate of return is a sign of a great
business.
We look for strong management teams. When buying shares in a company
we are relying on the management team to do sensible things and explain
them in a straightforward way. Integrity is an important quality for management
to have; we want them to act in the interests of shareholders, not themselves
or their colleagues.
Having found great companies and good managements, we wait for the
opportunity to invest at attractive prices. This can take years and may never
happen. Great companies rarely trade very cheaply and if they do, it is usually
because there is some recent bad news about the company, its sector or the
economy. We specialise in determining whether the factors causing the share
price to fall are temporary or not. Occasionally, the stock market overreacts to
short term negative developments and we get a great opportunity to invest
with a long-term horizon.
We buy to hold.
Although we are buying shares, we consider
ourselves as buying a whole business. Ideally,
we look for a company whose prospects are
so good we could hold them forever.
We stick to what we know.
We have developed a deep expertise in
some areas and don’t operate beyond that.
We are focused.
We typically hold 15 to 20 stocks in the
portfolio because we believe in backing
our best ideas. This gives us sufficient
diversification and allows us to concentrate
our efforts on what we own.
The ride can be bumpy.
Buying a focused portfolio of stocks that are
out of favour can result in a lot of volatility.
Unlike most of the financial services industry,
we don’t consider volatility to be risk. Volatile
markets provide investment opportunity.
www.aurorainvestmenttrust.comWhat makes us The depth of our research. It gives us the confidence to have an unusually
concentrated portfolio. Our research involves everything from hanging around
different? with Games Workshop fanatics to tracking the release of Nike’s latest football
boot in Sports Direct stores throughout the country.
More recently, we have catalogued thousands of easyJet and Ryanair
flights, by departure airport, arrival airport, departure times and costs, to get a
true understanding of the budget airline “battleground”.
Fees We have a fee structure which aligns Phoenix’s interests with those of
investors.
We charge no management fees. The only fees relate to performance, and
we only earn that fee when we exceed the return of the FTSE All Share. The
performance fee is one-third of that out-performance. Investors are protected
from subsequent underperformance by a “clawback” mechanism. Phoenix only
does well when investors do well. This is how it should be.
We believe our fees are fair, transparent, and attractive for investors.
Put simply, if we don’t perform well, then we don’t get paid.
Team Aurora is governed by a Board of non-executive Directors with substantial
investment management experience.
The core investment team at Phoenix have been together for over 16 years.
The broader team have over 80 years combined investment experience.
Gary Channon Tristan Chapple
Gary Channon is the Chief Tristan is a Director at Phoenix,
Investment Officer and has been joining the firm in 2001 as a
since founding Phoenix in 1998. Prior Business Manager. In 2004 he
to that he was Co-Head of Equity and became a research analyst and
Equity Derivatives Trading at Nomura in 2010 he became a partner of
International. Before joining Nomura he Phoenix. He is also a Director
worked at Nikko and Goldman Sachs. of the Aurora Investment Trust.
www.aurorainvestmenttrust.comDisclaimer THIS DOCUMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS.
INVESTORS SHOULD READ THE PROSPECTUS PUBLISHED BY AURORA
INVESTMENT TRUST PLC (THE “COMPANY”) IN CONNECTION WITH THE
ADMISSION OF NEW SHARES OF THE COMPANY (“THE NEW SHARES”)
TO THE OFFICIAL LIST OF THE UK LISTING AUTHORITY AND TO TRADING
ON THE MAIN MARKET OF THE LONDON STOCK EXCHANGE. INVESTORS
SHOULD NOT SUBSCRIBE FOR ANY SHARES REFERRED TO IN THIS
DOCUMENT EXCEPT ON THE BASIS OF THE INFORMATION CONTAINED
IN THE PROSPECTUS.
Copies of the prospectus are available from the Aurora website: www.aurorainvestmenttrust.com.
This document is issued by Phoenix Asset Management Partners Limited in the United Kingdom only. Phoenix
Asset Management Partners Limited is authorised and regulated in the UK by the Financial Conduct Authority.
This document is not for distribution in or into any member state of the European Economic Area (other than the
United Kingdom), the United States, Canada, Australia, the Republic of South Africa, Japan, or to any resident
thereof, or in or into any other jurisdiction where local laws or regulations may result in a risk of civil, regulatory or
criminal exposure or prosecution if this document is sent or made available to a person in that jurisdiction.
The distribution of this document may be restricted by law and persons into whose possession it comes are
required to inform themselves of and comply with any such restrictions. This document does not constitute or
form part of, and should not be construed as constituting or forming part of, any offer to sell or issue, any invitation
to make any investment in, or any solicitation of any offer to purchase or subscribe for, any securities or other
investments, nor shall any part of this document constitute a recommendation regarding any securities or other
investments. Application for shares may only be made in due course on the basis of a prospectus relating to the
Company which may in some respects differ from the information herein. This document sets out certain features
of the Company and does not purport to provide a complete description of the Company or its shares. It is for
information only and may not be relied upon for any purpose, and no representation or warranty is given as to its
accuracy or completeness. Views and opinions, whilst given in good faith, are subject to change without notice.
Information relating to the Phoenix UK Fund (the “Representative Fund”) is provided for information purposes only
and does not constitute a recommendation, a solicitation, an offer, an advice, or an invitation to purchase or sell
and should in no case be interpreted as such.
This document has been prepared for general information purposes only and is intended to provide a summary of
the subject matter covered. It does not purport to be comprehensive or to give advice. The views expressed are
the views of the writer at the time of issue and may change over time.
The information contained within this document has been obtained from sources believed to be reliable and
accurate at the time of issue. Phoenix Asset Management Partners Limited does not accept any liability for any
loss arising whether directly or indirectly from any use of this document.
Reference to specific securities (if any) is included for the purpose of illustration only and should not be construed
as a recommendation to buy or sell. Reference to the names of any company is merely to explain the investment
strategy or to provide information on the holdings in any fund and should not be construed as investment advice
or a recommendation to invest in any of those companies.
Past performance of the Representative Fund is not a reliable indicator of future results of the Representative
Fund or the Company. The value of investments and any income from them may go down as well as up. Investors
may get back less than the original amount invested. There is no guarantee that the Company will achieve its
investment objective and investment results may vary substantially over time. Shares in an investment trust are
traded on a stock market and the share price will fluctuate in accordance with supply and demand and may not
reflect the underlying net asset value of the shares. Other risk factors such as political and economic conditions
should also be considered. Where a fund holds a limited number of investments and one or more of those
investments declines or is otherwise adversely affected, it may have a more pronounced effect on the fund’s
value than if a larger number of investments were held.
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