Aoris is a specialist global share manager founded in 2017 by Stephen Arnold. Stephen previously managed the Evans & Partners Global Equity Strategy from 2011 to 2017, delivering a return of 18.3% per annum with over $1bn in assets under management. Stephen founded Aoris in an effort to bring his successful investment strategy to a broader group of investors.
What’s the fund?
This month we are reviewing the Aoris International Fund, which is a long-only global equity strategy. Aoris are unique in that they have a high conviction approach, holding just 10 to 15 companies and provide transparency into every investment at all times. Aoris have identified that avoiding the companies that fall into the bottom 20% of the market in any given year is the closest thing to guaranteeing outperformance. They understand that the poorest performers typically suffer from high debt levels, inflated valuations and poor returns on investment capital, which are key considerations of the team.
Aoris’ differentiating point is simplicity, and a focus on finding high quality companies. The research team achieves this by excluding a number of more popular sectors from the universe of opportunities. For example, Aoris will not invest in businesses with high leverage (financials/banks), low return on invested capital (energy), cyclical revenue (mining), regulated income (utilities), opaque (healthcare), narrow product offerings (IT) or commoditized products (retail). The result is that Aoris portfolio is tilted towards service providers and traditional industrial or diversified companies that are more suited to negotiating difficult economic periods. The result is a portfolio of high quality companies, operating in diverse industries offering true diversification.
Where does it fit in your portfolio?
Aoris meets the objective of the Value Bucket as the fund seeks to generate a return of between 8-12% per annum, with just 1-2% coming from dividends. This objective return is achieved by targeting companies offering 6-7% annual growth in their intrinsic value, or more importantly their profitability, 1-2% from dividends and 2-3% from market revaluations. More simply, the fund focuses on buying businesses that are growing earnings and revenue, not one or the other, and which have both breadth and diversification of those revenue streams, removing any cyclicality.
Aoris exhibits two of the most important characteristics of successful active fund managers; low portfolio turnover and high active share. Low turnover is driven by their core, high conviction portfolio whilst active share relates to the fact that the underlying portfolio differs substantially from the benchmark index. The Aoris Fund will complement the alternative global funds in most portfolios due to the substantial difference in underlying investments. The fund will not hold the likes of Facebook, Amazon, or the major banks, due to their strict screening process, meaning there will be limited, if any, overlap with the other funds in your portfolio. The management team have shown a unique and repeatable ability to identify companies with economic and competitive resilience, even during the worst of times, and their focus on return on invested capital, continues to be a driver of real value in an increasingly expensive market.
The fund charges a competitive management fee of 1.1% plus a performance fee of 15%. We have successfully negotiated a discount to this fee on behalf of all clients of Wattle Partners.
What does it invest in?
Aoris will only buy and hold individual companies, they will not bet on companies falling in value. The portfolio is highly concentrated, at 10-15 holdings, meaning every investment will have a real impact on the performance of the portfolio. At present, the key holdings are spread across the globe, but with 51% of revenue coming from the US, 23% from Europe and 17% from Asia. These holdings include global luxury business Louis Vuitton Moet Hennessy (LVMH), make-up and skincare retailer Loreal, consumer credit reporting company Experian, consulting business Accenture and sportswear brand Nike.
How has it performed?
The fund is a long only strategy, meaning The fund delivered a return of 18.7% for the 12 months to August 2019, outperforming the MSCI benchmark which returned just 7.0%. Importantly, the fund has not had a single holding in the bottom 20% of the market since its inception.