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13 Aug 2021 - Hedge Clippings | 13 August 2021
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13 Aug 2021 - Silk Laser Clinics Case Study: How do Private Equity Managers Make Money?
Silk Laser Clinics Case Study: How do Private Equity Managers Make Money? Chris Faddy, Vantage Asset Management 13 August 2021 We have written previously about the importance of exits (link to previous article) and the important role that Private Equity managers play in generating returns through identifying the optimal path to a company sale. The other critical role that Private Equity managers play in generating return is the provision of capital and management expertise to meaningfully help a company improve its operating performance. The common misconception about Private Equity is that managers simply find companies with good cash flows, apply leverage to the balance sheet, significantly cut costs then pay down debt using those cash flows hence increasing the value of the business. In the mid-market growth/buyout segment that Vantage Asset Management invests in, this misconception could not be further from the truth. For small to mid-market sized private companies, significant value can be created by leveraging the expertise provided by private equity firms. Company efficiencies are improved, growth is accelerated through customer expansion, M&A activity, managing cash, reducing costs, attracting talent and improving IT systems. Often these businesses see private equity as a valuable way of accessing industry experts who can assist with benchmarking, entering new markets and generally providing expertise that is not readily available otherwise. A study conducted by Adams Street Partners of the US buyout market found that the source of value creation from revenue growth through Private Equity manager intervention created 38% of the total return and multiple arbitrage (which is often a by product of revenue growth) created 33% of the return. Leverage ranked a distant third of the return drivers. This highlights the ability of Private Equity managers to bring meaningful value to private investments through the enhancements they make to businesses and ultimately the returns they generate for investors. CASE STUDY: SILK LASER CLINICS SILK was co-founded by its current CEO Martin Perelman in 2009 in Adelaide and had an initial focus on laser hair removal treatments. The Australian non-surgical aesthetics industry is projected to generate revenues of $5.8Bn in CY2021 however it is highly fragmented with five large specialist clinic chains estimated to account for approximately 31% of the total number of clinics (as at 9 September 2020). Advent Partners, one of Australia's leading Private Equity managers with a 35 years track record of investing in mid-market companies, first invested in SILK in January 2018. At the time the business consisted of 12 clinics primarily based in Adelaide whose revenue was mainly derived from hair removal procedures, a treatment which was experiencing margin reduction due to the procedure becoming more accessible to consumers. At the time SILK also offered cosmetic injections, skin treatments and tattoo removal. Subsequent to the acquisition, Advent worked with management to put a number of key initiatives in place to grow SILK including:
These initiatives saw SILK grow from 12 clinics to 56 clinics by December 2020 achieving two year compound annual growth rate (CAGR) of 79% and 414% to FY2020 in Network Cash Sales and Underlying EBITDA respectively. During December 2020, the Advent Partners 2 Fund completed the successful exit of SILK Laser Clinics Australia via an IPO. SILK Laser Clinics Australia (ASX: SLA) listed on 15 December 2020 at a share price of $3.45, implying an enterprise value of $162 million. Upon listing Advent Partners 2 realised 50% of their original investment holding in SILK, representing 2.0x of the Fund's original investment in SILK, with the Fund retaining 28% of SILK post IPO. Once fully completed the exit will deliver Advent Partners 2 investors, including VPEG3, with top tier performing returns across a 2.9-year investment period. Pleasingly SILK has continued to perform since listing up 40c from its listing price with FY21 prospectus forecasts recently upgraded off the back of continued operating success thanks to the initiatives that Advent Partners have helped put into place. If you would like to share in the growth and ultimate returns derived from similar small to mid-market company investments, Vantage Private Equity Growth Fund 4 ("VPEG4") remains open until 30 September 2021. Funds operated by this manager: |

13 Aug 2021 - Performance Report: DS Capital Growth Fund
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Fund Overview | The investment team looks for industrial businesses that are simple to understand; they generally avoid large caps, pure mining, biotech and start-ups. They also look for: - Access to management; - Businesses with a competitive edge; - Profitable companies with good margins, organic growth prospects, strong market position and a track record of healthy dividend growth; - Sectors with structural advantage and barriers to entry; - 15% p.a. pre-tax compound return on each holding; and - A history of stable and predictable cash flows that DS Capital can understand and value. |
Manager Comments | The fund's returns over the past 12 months have been achieved with a volatility of 8% vs the index's 10.35%. The annualised volatility of the fund's returns since inception in January 2013 is 11.16% vs the index's 13.6%. Over all other periods, the fund's returns have been consistently less volatile than the index. Since inception in January 2013 in the months where the market was positive, the fund has provided positive returns 91% of the time, contributing to an up-capture ratio for returns since inception of 73.41%. Over all other periods, the fund's up-capture ratio has ranged from a high of 120.88% over the most recent 24 months to a low of 87.35% over the latest 60 months. An up-capture ratio greater than 100% indicates that, on average, the fund has outperformed in the market's positive months. The fund's down-capture ratio for returns since inception is 45%. Over all other periods, the fund's down-capture ratio has ranged from a high of 73.41% over the most recent 36 months to a low of 15.64% over the latest 12 months. A down-capture ratio less than 100% indicates that, on average, the fund has outperformed in the market's negative months. |
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13 Aug 2021 - Performance Report: Collins St Value Fund
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Fund Overview | The managers of the fund intend to maintain a concentrated portfolio of investments in ASX listed companies that they have investigated and consider to be undervalued. They will assess the attractiveness of potential investments using a number of common industry based measures, a proprietary in-house model and by speaking with management, industry experts and competitors. Once the managers form a view that an investment offers sufficient upside potential relative to the downside risk, the fund will seek to make an investment. If no appropriate investment can be identified the managers are prepared to hold cash and wait for the right opportunities to present themselves. |
Manager Comments | Since inception in February 2016 in the months where the market was negative, the fund has provided positive returns 65% of the time, contributing to a down-capture ratio for returns since inception of 38.29%. Over all other periods, the fund's down-capture ratio has ranged from a high of 80.04% over the most recent 24 months to a low of -72.58% over the latest 12 months. A down-capture ratio less than 100% indicates that, on average, the fund has outperformed in the market's negative months over the specified period, and negative down-capture ratio indicates that, on average, the fund delivered positive returns in the months the market fell. The fund's up-capture ratio since inception is 86.43%. Over all other periods, the fund's up-capture ratio has ranged from a high of 189.49% over the most recent 24 months to a low of 94.92% over the latest 60 months. An up-capture ratio greater than 100% indicates that, on average, the fund has outperformed in the market's positive months over the specified period. |
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13 Aug 2021 - Webinar | Premium China Funds Management
Premium China Funds Management: Chinese Regulators - What's going on?
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13 Aug 2021 - Fund Review: Bennelong Kardinia Absolute Return Fund July 2021
BENNELONG KARDINIA ABSOLUTE RETURN FUND
Attached is our most recently updated Fund Review. You are also able to view the Fund's Profile.
- The Fund is long biased, research driven, active equity long/short strategy investing in listed ASX companies.
- The Fund has significantly outperformed the ASX200 Accumulation Index since its inception in May 2006 and also has significantly lower risk KPIs. The Fund has an annualised return of 8.64% p.a. with a volatility of 7.62%, compared to the ASX200 Accumulation's return of 6.68% p.a. with a volatility of 14.24%.
- The Fund also has a strong focus on capital protection in negative markets. Portfolio Managers Kristiaan Rehder and Stuart Larke have significant market experience, while Bennelong Funds Management provide infrastructure, operational, compliance and distribution capabilities.
For further details on the Fund, please do not hesitate to contact us.


12 Aug 2021 - Performance Report: Bennelong Kardinia Absolute Return Fund
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Fund Overview | The Fund's discretionary investment strategy commences with a macro view of the economy and direction to establish the portfolio's desired market exposure. Following this detailed sector and company research is gathered from knowledge of the individual stocks in the Fund's universe, with widespread use of broker research. Company visits, presentations and discussions with management at CEO and CFO level are used wherever possible to assess management quality across a range of criteria. Detailed analysis of company valuations using financial statements and forecasts, particularly focusing on free cash flow, is conducted. Technical analysis is used to validate the Manager's fundamental research and valuations and to manage market timing. A significant portion of the Fund's overall performance can be attributed to the attention and importance given to the macro economic outlook and the ability and willingness to adjust the Fund's market risk. |
Manager Comments | The annualised volatility of the fund's returns since inception in May 2006 is 7.62% vs the index's 14.24%. Over all other periods, the fund's returns have been consistently less volatile than the index. The fund's Sortino ratio (which excludes volatility in positive months) has ranged from a high of 1.61 for performance over the most recent 12 months to a low of 0.16 over the latest 36 months, and is 1.23 for performance since inception. By contrast, the ASX 200 Total Return Index's Sortino for performance since May 2006 is 0.32. The fund's down-capture ratio for returns since inception is 48.66%. Over all other periods, the fund's down-capture ratio has ranged from a high of 160.44% over the most recent 12 months to a low of 44.49% over the latest 24 months. A down-capture ratio less than 100% indicates that, on average, the fund has outperformed in the market's negative months. |
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12 Aug 2021 - Webinar Invitation | AIM
AIM Webinar: Key trends from this earnings season Wednesday, 18 August 2021 at 11:00AM AEST
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12 Aug 2021 - Why do most acquisitions fail?

11 Aug 2021 - Performance Report: Quay Global Real Estate Fund
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Fund Overview | The Fund will invest in a number of global listed real estate companies, groups or funds. The investment strategy is to make investments in real estate securities at a price that will deliver a real, after inflation, total return of 5% per annum (before costs and fees), inclusive of distributions over a longer-term period. The Investment Strategy is indifferent to the constraints of any index benchmarks and is relatively concentrated in its number of investments. The Fund is expected to own between 20 and 40 securities, and from time to time up to 20% of the portfolio maybe invested in cash. The Fund is $A un-hedged. |
Manager Comments | The fund's returns over the past 12 months have been achieved with a volatility of 9.11% vs the index's 6.75%. The annualised volatility of the fund's returns since January 2016 is 11.89% vs the index's 11.63%. Over all other periods, the fund's volatility relative to the index has been varied. The fund has only experienced a negative annual return once. Since January 2016 in the months where the market was negative, the fund has provided positive returns 29% of the time, contributing to a down-capture ratio for returns since January 2016 of 62.85%. Over all other periods, the fund's down-capture ratio has ranged from a high of 69.58% over the most recent 60 months to a low of -110.52% over the latest 12 months. Over the past 12 months, the fund's largest drawdown was -0.85% vs the index's -3.11%, and since January 2016 the fund's largest drawdown was -19.68% vs the index's maximum drawdown over the same period of -23.56%. |
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