Yes, the fund's dividend payout will be announced in October year. e.g. The fund paid out a 3.7 cent fully franked dividend in October/November 2017. All investors are given the option of either receiving their dividend as cash or through a dividend reinvestment plan.
Yes, our number one priority is performance and we will ensure asset remain at a level at which we can continue to access the most compelling smaller company investment opportunities on the ASX.
We report monthly as well as annually.
The latest monthly report is available here.
Our objective is to invest in 15-20 of the highest quality smaller companies on the ASX at valuations which offer significant upside to fair value.
The first step in this process is to define the list of companies which meet our definition of high quality (strong balance sheet, excellent management, growing competitive advantages & well defined strategies). This process has taken us many years and we believe that less than 100 of the 2000+ ASX listed companies meet all these criteria.
The second step is to complete in-depth quantitative and qualitative research on each of these companies, including management meetings.
And finally, if we believe there is a sufficient margin of safety between the current valuation and our view of fair value we will consider buying the stock.
We pride ourselves on our disciplined value investing approach.
We are often asked how we view the fund's outlook after achieving the 81.6% out-performance of the All Ords after fees since launch 3 years ago.
We believe the answer is in the stocks which comprise the DMX Capital Partners portfolio, which generally tick the following boxes:
- High quality - we have a very high hurdle rate for quality - only c. 5% of the ASX smaller companies universe qualifies - we believe the lower the hit rate the more sustainable is our process;
- Under-valued - we are invested in companies which are trading at only 8 to 12 times FY18 earnings, well below the market average;
- Simple business models - we are invested in simple business models which we find far easier to understand than most larger companies;
- Strong balance sheets - most portfolio companies have net cash surpluses which lowers the portfolio's financial risks and increases its exposure to value creating opportunities;
- Undiscovered - we are invested in businesses which are generally ignored and / or misunderstood by the market (i.e. no broker research) - as their profiles grow we expect their valuations to increase.
This is exactly how the fund was placed just over 2 years ago so we remain as confident as at launch regarding the fund's long term future in this exciting asset class.
We believe smaller company investors should think long term to realise the substantial benefits of investing in this lucrative asset class. As a result we aim to hold stocks for at least 5 years.
Please read our recent article on this here.
Yes, the minimum investment is $10,000.
Yes, DMX Capital Partners has a buy-back facility in place. If investors would like to withdraw their funds they should let the manager know in writing before month end and they will receive their funds back within the first 2 weeks of the following month.
We are focused upon generating positive absolute returns in all market conditions and believe fund managers shoud be incentivised based on performance rather than building assets under management (contrary to how the industry has historically worked). As a result we charge a low annual management fee of 1% p.a. and are incentivised to achieve absolute performance through a performance fee of 15% on all returns above BBSW (http://www.afma.com.au/data/BBSW).
Our fee structure is aimed at aligning our shareholders' interests with our own. We view DMX Capital Partners' performance to date as compelling evidence that this fee structure is in our shareholders' best interests.
Thus far the manager has re-invested all fees back into DMX Capital Partners.
By way of background, the fund's correlation with the All Ords since launch 3 years ago is only 24.5% as at 31st March 2018. And in the 14 of those 36 months when the market fell, DMX Capital Partners averaged a positive absolute monthly return of 1.6%, and an average monthly relative out-performance of the All Ords of 4.6%.
In our opinion there are a few clear reasons:
1. We are investing in largely unknown and undiscovered smaller companies which are generally ignored by the broking community and broader market. By focusing on these undiscovered stocks with high upside potential and low downside risk, the fund is well placed to "do its own thing" rather than trade in line with the market.
2. We are disciplined value investors. By investing in companies with a significant margin of safety we are generally avoiding the stocks which tend to sell off the most during periods of market weakness; the highly valued growth stocks.
3. DMX Capital Partners has a cash weighting in excess of 20% which both provides protection during periods of market weakness, and also allows us to remain on the front foot if opportunities emerge in our shortlist of high conviction stocks.
4. DMX Capital Partners comprises only our 15-20 highest conviction stocks. We believe this is a key strength since in our experience many fund managers build larger portfolios which contain lower conviction stocks and thus create the risk of a "tail" of under-performers which often limits out-performance potential.