Kardinia Capital is a boutique asset manager investing in Australian equities via an absolute return, variable beta, long/short strategy.
We aim to build a portfolio of high quality companies with predictable, sustainable earnings and a demonstrable track record in earning those cashflows through different market cycles. When overlaid with our disciplined risk measures, this creates a powerful combination to protect our investors’ capital in falling markets and grow wealth over the long term.
This robust risk management framework is an important part of our strategy, and includes market exposure limits (outlined below) and single stock limits. Our fund also has a disciplined stop loss policy, which effectively means that if any position moves against Kardinia by more than 15%, we immediately exit the stock entirely. In times of extreme volatility, this has saved our investors significant losses.
The variable beta nature of the strategy is also key to its success. We have the ability to move our net market exposure significantly, from a maximum of 75% long down to a minimum of 25% short (with the rest in cash). This allows us to move quickly in times of market volatility – capitalising on a strengthening market by increasing net exposure, or reducing that exposure to protect capital in weaker and negative markets.
Absolute return funds aim to generate positive returns month in, month out – regardless of how an index is performing – to capture the power of compounding over the long term.
Variable beta funds have the ability to increase or decrease their exposure to the equity market (depending on the manager’s outlook) by adjusting their level of long positions, short positions and/or cash holdings.
A long/short strategy takes long positions in stocks that are expected to increase in value and short positions in stocks that are expected to decrease in value, with an overall goal of increasing returns and minimising volatility.