Optimal Australia is a specialist Australia / NZ long-short equity investment manager established in 2008 by George Colman and Peter Whiting. We operate as a functional part of Optimal Fund Management, which has managed pan-Asian equity product for institutional investor clients since 1989. Our aim is to provide investors with consistent positive risk-adjusted returns in all market conditions.
The Optimal Australia Absolute Trust has achieved an average return (net of all fees) of 9.2% p.a. since inception in September 2008, on average net equity exposure of 10% and using no leverage.
Optimal Australia has a fundamental research bias, and places a strong emphasis on stock selection. Our core strategy is to construct a portfolio of listed equity securities priced at levels that do not adequately reflect their underlying value.
We are fundamentally driven investors, and believe that alpha-generation is hard work, requiring a deep insight into industry sectors and underlying companies, a willingness to assume out-of-consensus risk based on that work, and a flexible mind-set.
We view the equity market in Australia as highly efficient. As such, we believe that most high-liquidity, large-capitalisation stocks have an identifiable ‘fair value’ range, based on comparative advantage/growth rate/capital structure and allied fundamental considerations.
Our process is to combine intensive fundamental research with active consideration of non-fundamental factors, and is particularly interested in stock prices variances from our perceived fair value range, in either direction. We make it our business to find out why such variances are occurring, at both the fundamental (e.g. earnings, industry, or peer valuation dynamics) and market (typically liquidity or sponsorship changes) levels.
We are at all times acutely aware of risks arising from a high level of what we term ‘institutional bias’ in Australia — i.e. that such a large proportion of total equity AUM in Australia is managed in the same style (active-index), with relatively high concentration across a small number of very large funds, often trying to do the same thing at the same time.