{"id":54612,"date":"2017-05-04T06:15:23","date_gmt":"2017-05-04T06:15:23","guid":{"rendered":"http:\/\/ppmfunds.wpengine.com\/?page_id=54612"},"modified":"2020-03-03T14:50:09","modified_gmt":"2020-03-03T03:50:09","slug":"investment-philosophy","status":"publish","type":"page","link":"https:\/\/www.ppmfunds.com\/about-ppm\/investment-philosophy\/","title":{"rendered":"Investment Philosophy"},"content":{"rendered":"

[vc_row row_height_percent=”0″ override_padding=”yes” h_padding=”2″ top_padding=”3″ bottom_padding=”0″ overlay_alpha=”50″ gutter_size=”3″ column_width_percent=”100″ shift_y=”0″ z_index=”0″][vc_column column_width_percent=”100″ position_horizontal=”left” gutter_size=”3″ overlay_alpha=”50″ shift_x=”0″ shift_y=”0″ z_index=”0″ medium_width=”0″ width=”1\/1″][vc_custom_heading heading_semantic=”h3″ text_size=”h3″ text_transform=”uppercase”]<\/p>\n

Blending prudence with opportunity<\/h2>\n

[\/vc_custom_heading][\/vc_column][\/vc_row][vc_row row_height_percent=”0″ override_padding=”yes” h_padding=”2″ top_padding=”2″ bottom_padding=”3″ overlay_alpha=”50″ gutter_size=”3″ column_width_percent=”100″ shift_y=”0″ z_index=”0″][vc_column column_width_percent=”100″ position_horizontal=”left” gutter_size=”3″ overlay_alpha=”50″ shift_x=”0″ shift_y=”0″ z_index=”0″ medium_width=”0″ width=”8\/12″][vc_column_text]Achieving the right balance between safeguarding investor funds and positioning their portfolios to best capture opportunities is one of the key challenges facing any fund manager. If addressed properly, an appropriate balance between risk and reward can offer a compelling long term investment.<\/p>\n

PPM\u2019s success is built around investment expertise in navigating this balance. We believe it is this expertise and capability which differentiates us from other fund managers.<\/p>\n

Our investment philosophy is focused on growing the earnings of our clients portfolios through market cycles in a tax effective and attractive risk\/reward manner by building a concentrated portfolio of direct equities of 20-25 exceptional\u00a0companies that meet our valuation and return expectations over the medium to long term.[\/vc_column_text][\/vc_column][vc_column column_width_percent=”100″ gutter_size=”2″ back_image=”54083″ overlay_alpha=”50″ border_color=”color-lxmt” border_style=”solid” shift_x=”0″ shift_y=”0″ shift_y_down=”0″ z_index=”0″ medium_width=”0″ mobile_width=”0″ width=”4\/12″ css=”.vc_custom_1557541079040{border-top-width: 4px !important;border-bottom-width: 4px !important;}”][vc_column_text text_lead=”yes”]“Our success is based on several tenets that guide our investment decisions and portfolio management discipline.”<\/em><\/span>[\/vc_column_text][vc_column_text]Peter Reed, Director & Portfolio Manager<\/span>[\/vc_column_text][\/vc_column][\/vc_row][vc_row row_height_percent=”0″ override_padding=”yes” h_padding=”0″ top_padding=”0″ bottom_padding=”0″ back_color=”color-lxmt” overlay_alpha=”50″ equal_height=”yes” gutter_size=”0″ column_width_percent=”100″ shift_y=”0″ z_index=”0″][vc_column column_width_percent=”100″ position_horizontal=”right” position_vertical=”middle” gutter_size=”3″ override_padding=”yes” column_padding=”3″ style=”dark” overlay_alpha=”50″ shift_x=”0″ shift_y=”0″ z_index=”0″ align_medium=”align_center_tablet” medium_width=”0″ align_mobile=”align_center_mobile” mobile_width=”0″ width=”5\/12″][vc_single_image media=”55141″ media_width_use_pixel=”yes” alignment=”center” media_width_pixel=”500″][\/vc_column][vc_column column_width_percent=”100″ gutter_size=”3″ override_padding=”yes” column_padding=”3″ style=”light” overlay_alpha=”50″ shift_x=”0″ shift_y=”0″ z_index=”0″ align_medium=”align_center_tablet” medium_width=”0″ align_mobile=”align_center_mobile” mobile_width=”0″ width=”7\/12″][vc_accordion active_tab=”0″ el_class=”cubify”][vc_accordion_tab title=”UTILISE STRUCTURAL INVESTMENT THEMES” tab_id=”9efdc3d4-62a1-2″][vc_row_inner][vc_column_inner width=”1\/1″][vc_column_text]We identify structural themes that produce attractive economic environments for the companies that operate within them. Broader than industry research, a thematic approach looks to capture long-term structural opportunities and is forward looking. It may identify them at an industry, sector, or company level, either globally or locally. We look to leverage several themes at any given point, and invest in the companies best positioned to benefit from the attractive business environments created by these economic, regulatory or structural themes.[\/vc_column_text][\/vc_column_inner][\/vc_row_inner][\/vc_accordion_tab][vc_accordion_tab title=”INVEST IN 20-25 EXCEPTIONAL COMPANIES THAT WE UNDERSTAND WELL” tab_id=”b21b7bc9-e4f3-4″][vc_row_inner][vc_column_inner width=”1\/1″][vc_column_text]PPM believes that there are a limited number of attractive situations in the market at any given time, and our clients\u2019 interests are best served by holding exceptional companies rather than diversifying into mediocre companies. A concentrated portfolio of between 20 and 25 companies provides sufficient diversification and affords a greater opportunity to outperform, as the larger the number of holdings in a portfolio, the greater the likelihood that the portfolio will track the broader market.<\/p>\n

PPM will invest in companies that we understand well. We are research driven and regularly attend company briefings. Our research philosophy gives us the confidence and patience to allow the full benefits of our investment decisions to play out. Underpinning our proprietary research is the analysis and insights provided by a panel of leading global and Australian institutional brokers. Companies with complex business structures or less than transparent propositions are excluded as they can carry unquantifiable risks.[\/vc_column_text][\/vc_column_inner][\/vc_row_inner][\/vc_accordion_tab][vc_accordion_tab title=”HOLD THE COMPANIES FOR LONG PERIODS OF TIME” tab_id=”45ac8ed6-47c6-8″][vc_column_text]Portfolio positions are built and held to enable the underlying growth forecasts of the business to play out over the next 3-5 years. The market risks in short-term investing are substantial and inherently unpredictable. Our patient approach is more predictable as we are relying on the performance of well managed companies and the investment themes we have identified, rather than market sentiment to generate returns. We work with our clients to structure a diversified, tax effective investment portfolio based on their chosen investment strategy. Such a portfolio should preserve capital through different market conditions and\u00a0outperform the share market over long periods in a tax effective manner. Consistent with our long\u2013term focus, turnover is low reducing transaction costs and tax. We do not employ active market timing or derivatives trading strategies.[\/vc_column_text][\/vc_accordion_tab][vc_accordion_tab title=”AVOID THE CROWDS AND POPULAR OPINIONS” tab_id=”f6e647af-07de-6″][vc_column_text]At PPM, we prefer to avoid investments that are considered popular, as their pricing usually reflects the value of the opportunity plus a premium of their popularity. Where the underlying fundamentals are attractive, we are comfortable investing in companies and industries that are not fully understood by the market. When, combined with our long-term approach this strategy allows us to capture these underappreciated opportunities.[\/vc_column_text][\/vc_accordion_tab][vc_accordion_tab title=”UNDERSTANDING RISK MANAGEMENT” tab_id=”79ebbf50-aa66-6″][vc_column_text]Our risk minimisation efforts begin at the company level where we look to a range of factors, critical to this process is the elimination typically of companies with high debt levels or complex financial structures. When constructing a portfolio, achieving diversification across companies, business models, investment themes, and industries is an important consideration. Unless requested by a client, no one security will exceed 10% and no one industry sector will exceed 25% of the portfolio\u2019s value. Market timing is not utilised, with portfolio turnover generally less than 25% per annum.[\/vc_column_text][\/vc_accordion_tab][vc_accordion_tab title=”APPROACH RETURNS IN AN AFTER TAX BASIS” tab_id=”52e64c90-213e-9″][vc_column_text]Tax effective investment management can produce significant increases in real returns.\u00a0 Although the benefit of tax effective investment strategies will vary depending on the individual investor and their overall tax situation, academic studies estimate that investment management using a tax effective investment approach may add up to 2% per annum to real returns.<\/p>\n

Even for those in a low or tax exempt environment, adopting a tax effective investment strategy has considerable benefits due to Australia’s dividend imputation system and the ability to enhance returns through franking credits.<\/p>\n

PPM employs a variety of measures to help maximize after-tax returns and we are mindful of the tax position of the ultimate beneficiaries of the portfolios we manage. Our long-term approach means fewer tax events. Capital gains concessions can be fully franked dividends over other forms of returns which can create powerful tax benefits. This approach can have the effect of enhancing investors\u2019 real returns.<\/p>\n

Specifically, our approach to after tax investment management incorporates a variety of elements to help create tax effective investment portfolios, these include:[\/vc_column_text][vc_empty_space empty_h=”1″][uncode_list icon=”fa fa-chevron-right” icon_color=”accent”]<\/p>\n