Investment Process & Philosophy

At their core, all Ophir Funds employ the same fundamental, bottom-up research approach aimed at identifying businesses with the ability to meaningfully grow and compound earnings over time.

The Ophir Difference

At Ophir, we remain committed to ensuring we offer investors a clearly differentiated value proposition that aligns investors with the portfolio management team. This is delivered through a unique combination of people, company structure and investment process.

People

Ophir co-founders and Senior Portfolio Managers Andrew Mitchell and Steven Ng developed a close working relationship while co-managing an investment fund at Paradice Investment Management. The application of their extensive proprietary investment process and a deep passion and understanding of smaller cap businesses resulted in the Fund being ranked the top performing equity fund in Australia from June 2007 – June 2011 versus the fund manager surveys.

Following its inception in 2012, the Ophir Opportunities Fund has consistently ranked as one of the top performing small cap funds in Australia, while the Ophir High Conviction Fund (established in 2015) currently ranks as the top performing mid-cap fund in the country.

A key component of this performance has been a result of the individual skill set and knowledge base of the portfolio management team, their industry and business contacts and extensive track record in delivering superior performance outcomes.

Company Structure

Ophir Asset Management is proudly an independently-owned business, wholly owned by Senior Portfolio Managers Andrew Mitchell and Steven Ng. In addition to their equity share in the business, both Senior Portfolio Managers have the entirety of their liquid personal investments held within the Ophir Funds.

This is important for two specific reasons:

  • Ophir believes that investment management businesses owned (or part-owned) by third parties are ultimately geared towards maximising value for shareholders rather than unitholders. As a result, some businesses are heavily incentivised to grow funds under management to a level where the size of capital managed can have an impact on underlying fund performance. Ophir recognises this conflict and subsequently ensures that all funds have a cap on the amount of capital invested in each strategy in order to allow for the best possible structure to deliver outperformance;
  • Ophir treats all investors as co-investors in the Funds and subsequently ensures that the investment team hold investments personally in the Fund. This not only ensures that all Funds are operated with the underlying unitholder as the core focus, but also ensures the portfolio management team are heavily aligned with investors.

Investment Process

Ophir utilises an extensive proprietary investment process used to identify, screen and analyse prospective investments. This process has been tested through a number of investment and economic cycles and delivered strong annualised returns through those periods.

The Ophir Philosophy

Ophir will consider all investments within each Fund’s opportunity set, however will always favour well managed, undervalued businesses with clearly identifiable options for growth and sound capital structures. As investment markets can be emotional, attractive opportunities can also arise to own unloved yet fundamentally sound businesses.

To achieve our investment goals, we strongly believe an active “bottom-up” approach to investing is essential. This approach requires an extensive initial and ongoing assessment of a company’s individual merits to determine its investment performance and potential over time.

We believe that the quality of a company’s franchise and correctly valuing that franchise is the key determinant in evaluating the potential investment performance of a portfolio position. We place a great emphasis on analysing a company’s ability to generate cash and understanding the volatility / sustainably of each company’s future earnings profile.

We believe this is best achieved through a rigorous company visitation schedule, thorough investment process and intensive evaluation of the business ecosystem in which a company operates.

The Ophir Investment Process

At their core, all Ophir Funds employ the same fundamental, bottom-up research approach aimed at identifying businesses with the ability to meaningfully grow and compound earnings over time. Typically, the Ophir investment process will look to uncover businesses that:

  • Are operating within, or about to enter, a period of structural growth;
  • Are generating cash or have a clearly indefinable pathway toward free cash flow generation;
  • Operate with sound capital structures;
  • Have high quality leadership teams; and
  • Are under-researched, under-appreciated and/or not well understood by the broader investment market.

In order to identify these opportunities, the Ophir investment team spend a considerable amount of time understanding the quality of the business and the environment in which it operates.

There are six key elements to Ophir’s investment identification and evaluation process:

Extensive Company Visitation. The Ophir investment process is underpinned by a rigorous company visitation schedule. The team will meet with the senior management of companies within their investment universe on a regular basis, in addition to a wide array of contacts within a company’s broader ecosystem – their suppliers, competitors, customers and other interest groups that may provide insight into the business. As a result, the team travel extensively both domestically and internationally to meet contacts face to face.

Qualitative Assessment. The team must be satisfied they have a thorough and complete understanding of what an underlying business does, how it generates cash and how sustainable and predictable these cash flows are. The team will also consider the industry structure, company’s market position, growth strategy and any commercial trends affecting it.

Management Assessment. The competency and leadership of senior management teams within emerging small and mid-cap businesses can have a material effect on a company’s overall performance. As such, the Ophir team place a great emphasis on understanding the strength and capability of management and complete a broad overview of senior management’s track record, competence and experience.

Financial Modelling. As part of the quantitative assessment, the team will model the key financial statements in order to understand the key earnings drivers of the business and how they are affected when key assumptions change. The team will also assess the balance sheet and evaluate any trends in operating efficiency (for example, any changes in operating margins and return on capital).

Valuation. The team will incorporate a variety of valuation techniques, dependent on the industry in which the underlying business operates within. The most common methodologies utilised include enterprise value multiples, free cash flow yields, discounted cash flow and price to earnings.

Database & Ranking. Ophir maintains a proprietary database reflecting the key financial metrics of each company and a rank of all stocks in the investable universe based on valuation and expected return. The database assists the Portfolio Managers in prioritising investment analysis, evaluating risk/ return trade-offs and the optimisation of company visitations.