With approximately $400 million of funds under management and a focus on long-term investing, Forager Funds is a unique Australian asset management company.
Now with a 11-year track record, Forager is a sustainable business but remains nimble enough to invest in smaller listed companies not accessible to many investment managers.
The company is majority owned by staff, and Forager’s external shareholders support the desire to place performance before revenue. That means capping the size of funds before too much money becomes an impediment to performance.
Key investment staff are strongly aligned with investors through co-investment and equity in the Forager business.
As the Forager name suggests, our style of investing involves scouring the world looking for undiscovered opportunities. In assessing these opportunities, we find both asset backing and earnings power are useful valuation tools, depending on the type of business we are investing in.
We like buying smaller, less well known businesses that may provide opportunity for higher returns. This type of business combines well with more liquid mid to large cap stocks, resulting in robust portfolios.
We also like buying mid to large liquid stocks if they are available at reasonable prices. These types of business add resilience to the portfolios, and can provide an important source of liquidity in volatile markets where there may be other opportunities available at the smaller end of the market.
Our small size gives us the flexibility to combine these types of businesses into our portfolios. If the potential returns are high enough, we have no qualms investing in unknown businesses. And if the situation demands it, we are prepared to be activists in order to realise the value inherent in a company’s shares. This approach has worked well for us over the years.
Our aim for both mid to large liquid businesses and smaller less well known companies is to buy shares at prices we believe to be substantially less than their underlying value. Then we wait for the market to correct this mispricing.
This is more difficult than it sounds, which is why we have a rigorous research process and healthy debate within the team. Businesses change and stock valuation is an inexact science, so we only invest in stocks where the gap between our estimate of its value and the current share price is large enough to compensate for the uncertainty.
Chief Investment Officer, Steve Johnson, launched Intelligent Investor Funds in 2009, off the back of the highly successful stock-market newsletter The Intelligent Investor. The aim of the fund was to provide subscribers of the newsletter access to the small, sometimes more complicated investment opportunities still associated with the Forager Australian Shares Fund today.
The funds management business grew in 2013 with the establishment of the International Shares Fund to offer investors a unique portfolio of global shares unlike others in the market.
The company was renamed in 2014 to what we are known as today, Forager Funds Management.
The Forager Australian Shares Fund reached capacity in 2016 and the Fund converted to a listed investment trust, allowing new investors to continue to invest in the fund when units are available.
Alignment with Investors
Our commitments to investors are as follows:
First, we invest our money alongside yours. Second, we plan to restrict the amount of money we accept so that we can stay small and nimble. Third, we will communicate in a clear and transparent way.
It’s our belief that, along with tried and true value investing principles, these commitments give us the best possible chance of success.
Forager’s staff invest a significant portion of their wealth alongside you. And we have committed to limiting the funds to a size that allows them to remain invested in small to medium sized stocks.
One of our competitive advantages is an aligned and patient investor base.
At Forager, attracting the right sort of investor is more important than attracting investors per se.