Report

Ophir High Conviction Fund (ASX: OPH)

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The Ophir High Conviction Fund (OPH or ‘the Trust’) will be an approximate $425m market
cap listed investment trust (LIT), listing on the ASX on Wednesday 19 December 2019. The
Trust is managed by Ophir Asset Management (the ‘Manager’). The Trust will be converting
from the unlisted unit trust The Ophir High Conviction Fund (the ‘Fund’), which has been
hard closed since March 2018 and has an inception date of August 2015. Due to investment
capacity constraints, which the Manager adheres to strongly, there will be no additional
capital raised as part of the listing. The rationale for the conversion and listing is primarily
twofold: the ASX listing will provide the most optimal investment structure, with a closedended
structure ensuring a stable capital base (which is particularly important in smaller cap
investment strategies) and the listing enabling new and existing investors to access or top up
an investment in the previously hard closed investment strategy. The Trust provides investors
with a concentrated portfolio of high quality growth companies, selected as the ‘best ideas’
across the small and mid-cap coverage of the Ophir investment team. Specifically, the
portfolio comprises 15-30 targeted portfolio positions, with the additional mandate flexibility
to include ex-ASX 50 companies to extend the growth path. The investment process is very
much fundamental bottom-up with a Growth at a Reasonable Price (GARP) emphasis. Since
inception in August 2015, the Fund generated a net performance of 20.2% p.a., substantially
outperforming the Benchmark (50% S&P/ASX Mid-Caps Accumulation Index + 50% S&P/
ASX Small Caps Accumulation Index) by 14.1% p.a. (gross pre-tax NTA), albeit with higher
volatility. Ophir Asset Management is a specialist small and mid-cap Australian equities
manager established in August 2012 by Senior Portfolio Managers Andrew Mitchell and
Steven Ng, both having previously worked at Paradice Investment Management. In addition
to the Trust, the Manager also manages The Ophir Opportunities Fund, a small caps Australian
equities mandate, and which has delivered returns of 25.8% p.a. over its 6 year+ track record
since August 2012.
INVESTOR SUITABILITY
Small to mid-cap mandates are by their very nature high conviction mandates. Having said
that, the Trust represents one of the highest conviction mandates in the listed managed
investments small and mid-cap space, with potentially as little as 15 portfolio holdings
(typically 20 positions). For any such mandate, an investor must have a high degree of
conviction in the manager’s investment skill and the repeatability of investment process.
Investors must also recognise that with concentration comes an elevated degree of risk over
and above the relevant index, notwithstanding the strong preservation of capital approach
the Manager applies on each and every stock holding. The Trust has been very intentionally
designed in this way, representing a select portfolio of the Manager’s best investment ideas.
Through our research process, IIR has attained a high degree of conviction in the Manager’s
team and process, and the Manager’s strong track-record speaks to this quality. IIR believes
the Trust is most suited as an alpha-seeking component of a broader Australian equities
investment portfolio. Returns will predominantly be in the form of capital over income and the
listed investment trust structure also creates a higher degree of distribution variability risk over
a listed investment company structure, for example.
RECOMMENDATION
IIR ascribes a “RECOMMENDED PLUS” rating to The Ophir High Conviction Fund. The
co-PMs have an outstanding track record and one that is over a full market and economic
cycle. What distinguishes the Manager’s investment process is its efforts to establish an
information advantage over the market in respect to each eligible investment and, secondly,
its very active risk management process in relation to the dynamic weighting of the portfolio.
The strict adherence to, and the relative low capacity constraints work in the distinct interest
of unitholders. There is also a very strong alignment of interest with investors by way of the
Manager’s co-investment in the Trust. We view Ophir as a standout investment manager in
Underlying
The Ophir High Conviction Fund (ASX: OPH)

Provider
Independent Investment Research
Independent Investment Research

Independent Investment Research, "IIR", is an independent investment research house based in Australia and the United States. IIR specialises in the analysis of high quality commissioned research for Brokers, Family Offices and Fund Managers. IIR distributes its research in Asia, United States and the Americas. IIR does not participate in any corporate or capital raising activity and therefore it does not have any inherent bias that may result from research that is linked to any corporate/ capital raising activity.

IIR was established in 2004 under Aegis Equities Research Group of companies to provide investment research to a select group of retail and wholesale clients. Since March 2010, IIR (the Aegis Equities business was sold to Morningstar) has operated independently from Aegis by former Aegis senior executives/shareholders to provide clients with unparalleled research that covers listed and unlisted managed investments, listed companies, structured products, and IPO's.

IIR takes great pride in the quality and independence of our analysis, underpinned by high caliber staff and a transparent, proven and rigorous research methodology.

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