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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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11 Aug 2021 - How to position your portfolio for the delta variant
How to position your portfolio for the delta variant Roger Montgomery, Montgomery Investment Management 26 July 2021 Since late 2020, we've pivoted our portfolios to businesses likely to benefit from the economy's reopening - and generated excellent returns. But the emergence of the highly infectious delta variant makes the future far less certain. My take is that higher quality and structural growth businesses should again be on your radar. Allocating equity portfolios to companies growing structurally or to those recovering from earlier lockdowns and restrictions has benefited from optimism surrounding vaccine developments and rollouts. By way of example, the pent-up demand for travel has hitherto provided enthusiasm for tourism companies with strong or repaired balance sheets. Indeed, only last week the cruise ship company, Regent Seven Seas, broke all previous opening day records with all berths booked in less than three hours, despite prices ranging from $93,000 to a quarter of a million dollars. This echoes Carnival Cruises' experience last year when more than 90 per cent of cancelled travelers chose a US$200 on-board voucher for a future cruise in preference to a refund. In the US, leisure travel has bounced back strongly. LAX (Los Angeles Airport) is reported to be packed and struggling with the volumes. Robust demand for travel amongst employees and clients has resulted in corporate travel returning. Twenty per cent week-on-week growth has been reported over the last six weeks, reflecting the preference for face-to-face meetings over Zoom. According to one analyst, travel by Amazon staff has fully recovered to pre-COVID-19 levels. Consequently, airlines are said to be hiring like crazy, and unable to recruit enough staff. Anecdotally, rising delta cases globally aren't currently expected to halt the reopening. By way of example, Seattle's population is 74 per cent vaccinated and that city's Governor has said it won't shut down. Notably, 99 per cent of all hospitalisations are unvaccinated. In Australia, however, a very different picture exists A relatively low level (10 per cent of the population) of vaccinated individuals, lockdowns and border closures mean the return to normality is less clear. The delta variant is materially more infectious than the original COVID-19 strain and is now the dominant strain in Australia. And, importantly, with half of winter remaining, the lack of a broadly vaccinated population presents the virus with an opportunity to mutate, potentially undermining the efficacy of current vaccines. This has investors on tenterhooks. Victorian and New South Wales lockdowns, and the spread of the virus through other states, has resulted in less enthusiasm for forward booking travel. While leading indicators from Similarweb and Google trends remained strong into May, both trended lower into June, and are likely to have fallen further in July following the lockdowns of Australia's two most populous states. Travel companies aren't the only businesses impacted Lockdowns must necessarily shift spending from services and experiences (that were available in open cities) to online spending on goods. Online shopping spiked during the last 12-18 months, and as consumers returned to in-store shopping, online eased. This could rapidly reverse with only essential stores permitted to open. Of particular interest is the outlook for the beneficiaries of the boom in home renovations and home improvement. Harvey Norman, JB Hi-Fi, Nick Scali, Adairs were huge beneficiaries during last year's lockdowns. And amid the recent easing of restrictions, they continued to win. But durable goods tend to have long useful lives, meaning replacement cycles are also long. As the current renovation and building boom matures, so must the rate of growth in the sales of fridges, ovens and air-conditioners. Elsewhere, hospitals that might have seen a bounce in elective surgeries on the back of pent-up demand suffer from deferments and rescheduling. Further lockdowns and border closures would also necessarily slow the pace of economic recovery and, consequently, demand for raw materials and energy. Meanwhile, the boom for building materials companies, including Adelaide Brighton Cement, Boral and CSR, amid persistently low interest rates, declining unemployment and consequent strong demand for housing/home improvement, could also be derailed. And keep in mind the stricter Sydney lockdown is accompanied by smaller support and welfare payments in the absence of Job Keeper. It should not be surprising, in such circumstances, to see at least some capital reallocated from profitable reopeners to lockdown winners. The key question for investors to now consider, however, is whether a reopening is undermined by a new strain of the virus that evades vaccines. Indeed, not everyone in the UK is excited about the country's reopening. England's Chief Medical Officer Chris Whitty admitted hospital admissions could hit "scary numbers" if removing all restrictions leads to out of control infections and the opportunity for COVID-19 to mutate again. In just the last month, the Netherlands, with more than three-quarters of the population vaccinated, suffered the devastating effects of reopening too quickly. Infections rose more than 500 per cent in just one week. Shortly after the Dutch caretaker Prime Minister, Mark Rutte, announced that face masks would no longer be required, the Dutch government started backtracking on restrictions. New infections had doubled to 8,000 in the week ending 6 July. By 9 July, 7,000 cases were recorded in 24 hours and almost three-quarters of the new cases were in young people, half of whom were infected with the delta variant. A possible silver lining to the prospect of a longer road to reopening is a flatter yield curve (reflecting lower growth/inflation expectations) and dovish central bank frameworks. And when it comes to the markets, higher quality and structural growth stocks may yet again be on investors' radars. About the author Roger Montgomery founded Montgomery Investment Management, www.montinvest.com in 2010. Roger brings more than two decades of investment, financial market experience and knowledge. Roger also authored the best-selling investment book, Value.able. Funds operated by this manager: Montgomery (Private) Fund, Montgomery Small Companies Fund, The Montgomery Fund |