Investment Approach

Our Objective

To deliver the strongest possible risk adjusted returns to our clients.

Our Process

EGP Capital primarily invests for the long term. Since inception, the fund’s average holding period has approached 10-years. The reason for this uncommonly long average holding period is a stringent focus on deep research prior to buying excellent businesses with skilled management, operating in industries with favourable long-term trends. Such positions will usually comprise the largest part of the portfolio.

Occasionally we own businesses for shorter holding periods. These are businesses that sometimes don’t exhibit the same qualitative factors as our largest holdings, but commonly have in-built protections such as a high level of tangible assets, or an exceptionally cheap purchase price relative to the medium-term prospects of the business. It is imperative that there be a demonstrable mispricing in the risk-reward situation before we will invest.

We do not use leverage or invest in complex financial products or derivatives.

Our Portfolio

We have an unconstrained investment mandate. We are able to buy any asset globally that we feel will deliver a strong risk adjusted return. We can hold up to 100% cash as occasion may warrant and ‘short-sell’ if suitable opportunities exist. Despite this wide-ranging mandate, in practical terms, EGP Capital:

  • Holds mostly Australian listed smaller capitalisation businesses
  • Holds between 10-20% in cash
  • Holds around 25 stocks, of which:
    • the 5 largest holdings usually comprise more than 50% of the equity portfolio
    • the 15 largest holdings usually comprise nearly 90%
  • Only very occasionally uses shorting or arbitrage
EGP Capital

Our Benchmark

We benchmark ourselves against the S&P/ASX 200 Franking Credit Adjusted Annual Total Return Index (Tax-Exempt). The ASX200 is Australia’s premier equity index. We use the Franking Credit adjusted version of the index because the tax-adjusted nature of this index allows the fairest comparison against our own tax adjusted results.

Management Fees

EGP Capital charges no management fee.

Performance Fee

20% of outperformance above the S&P/ASX 200 Franking Credit Adjusted Annual Total Return Index (Tax-Exempt), applied only in years with a positive return.

Examples:

Administration Fees

Historically the operating costs of the fund have run below 10 basis points annually. This fee is capped at 25 basis points whilst the Pty Ltd structure is employed.

Should the fund switch to operation under the more traditional ‘Unit Trust’ structure, which would involve an external Trustee, Custodian and require an AFSL, administration costs will increase somewhat. We feel that if we can scale up to around $50m of FUM that we can keep the costs below 25 basis points at that size.