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Boutique Management, Value Investing, SMA Specialists

Ralton Asset Management Limited (‘Ralton’) is a successful boutique Australian fund manager, owned and operated by its directors and senior executives. As a pioneer in Australia’s managed accounts industry, Ralton has been offering its investment capabilities exclusively through separately managed accounts, or SMA’s, since 2001, and currently manages portfolios on behalf of a wide range of Investors, including charitable trusts, corporations, superannuation funds, family trusts and individuals.

Ralton specialises in the active management of Australian share portfolios, and its disciplined, value-oriented investment approach has delivered strong and tax-efficient returns since inception. From the very beginning, their objective has been to design and build high quality, value-adding Investment Portfolios, and they have achieved this by packaging the investment services in a managed account structure rather than a unit trust, offering Investors professional portfolio management with all the benefits of direct share ownership.

The Ralton investment team is well resourced and consists of experienced professionals with diverse backgrounds, all sharing a talent and passion for investing. This unique blend of experience and ability promotes insightful analysis and debate and brings a high degree of rigour to Ralton’s fundamental research-driven investment process.

Investment Philosophy

Ralton’s proven investment approach has been designed to identify quality businesses that are trading at a considerable discount to valuation, and is guided by the following fundamental beliefs:

• Markets are not perfectly efficient and the true value of a business is not always reflected in its share price.
• Undervalued companies can be identified through detailed and intensive research; and
• Capital preservation is critical to wealth creation.

The companies that Ralton typically invests in are those with strong and reliable management, good profit and dividend growth expectations, reasonably predictable future profits and cash flows, and a very clear business model. In contrast, Ralton tends to avoid investing in businesses that 1) lack pricing power in their relevant market, or 2) are higher risk, early-stage research & development or exploration based companies.

A Three Stage Investment Process

Intensive bottom-up research is the cornerstone of the entire process, supplemented by top-down economic and thematic views. The process is disciplined and consistently applied, using a number of proprietary qualitative and quantitative techniques to ensure that targeted companies have been thoroughly scrutinised.

Stage 1: Defining the Investment Universe

The first stage of the process is to narrow the number of stocks in the investment universe by applying a number of screens. This approach systematically eliminates companies that do not meet certain minimum standards, allowing the investment team to focus more intensely on companies of potential interest.

Stage 2: Bottom-up Fundamental Company Research

Ralton’s research programme is focused on understanding the key drivers of business performance and returns, namely people, operations, products and services, and market dynamics. For companies remaining in the investment universe, Ralton undertakes a detailed assessment of executive management, interviews competitors and suppliers, reviews financials, and forms a clear view on the outlook for the company’s industry.

Stage 3: Portfolio Construction

Risk management and capital preservation are key themes underlying the portfolio construction framework. With a focus on actively managing down-side portfolio risk for Investors, Ralton constructs an efficiently diversified portfolio of high quality, undervalued companies, and invests for the long term (typically at least 3 to 5 years) in an effort to maximise after-tax returns.

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