The Insync Global Capital Aware Fund has a conservative stock selection strategy from a select pool of global companies, enhanced by actively managing market risk and currency risk.

Insync believes that investing with a strong focus on capital preservation will lead to superior returns over time. The portfolio will typically hold one or two leading stocks within each “Megatrend” identified by Insync’s research. These stocks must meet strict qualitative and quantitative criteria. The Fund’s objective is to deliver global equity-like returns while providing downside defensiveness for severe market falls, resulting in a beneficial result to investors over the full cycle.

Established in July 2009, Insync is a global equity specialist based in Sydney, Australia. Mr Monik Kotecha and Mr John Lobb are the designated Portfolio Managers. Mr Kotecha is the final decision-maker and is Insync’s Chief Investment Officer and has over 28 years of funds management experience in international and Australian equity markets, having worked in London, New York and Sydney. Mr Lobb’s efforts focus on idea generation, analysis and the portfolio construction cycle. Recently joining the team as a Senior Investment Analyst is Mr. Mark Haet, a seasoned analyst and portfolio manager with over 32 years’ experience in the financial markets.

The fund’s investable universe is initially derived from the identification of 10-15 megatrend ideas. The team screens for these megatrend ideas from the starting position of the MSCI ACWI Index, which is comprised of 2,500 stocks. Through the application of screening factors such as Market Capitalisation, Return on Invested Capital (ROIC), and strong balance sheet, the universe is reduced to approximately 150-250 stocks.

Insync’s greater focus is on absolute valuation rather than relative valuation. This assists the Fund manage downside risk. The Fund employs three key tools to assess the valuation of a business: Proprietary ROIC Derived Evaluation, Free cash flow (FCF) yield and an implied growth model. ROIC Derived Evaluation is the more dominant valuation method. Relative valuation is observed to understand how the market has priced the business over time.

The philosophy and process of this Fund aims to provide downside protection in the shorter term. Risk management permeates the entire investment process, from stock selection through to portfolio construction. The team investigates the relationship between the stocks in the portfolio using correlation/co-variance analysis and exposure to different macroeconomic factors.

The team additionally aims to gain diversification across different megatrends. The Fund has an ongoing program of partial hedging of market risk through purchases of Index puts (S&P500) using a systematic process. This provides ongoing downside mitigation against sharp market falls. The process aims to protect capital against severe market falls (in the vicinity of -15% or greater).

The Fund systematically purchases Index put options (S&P500) to:

1. Protect the fund’s investments in the event of a significant fall in the share market

2. Optimise the cost such that it has a relatively small impact on performance of the fund

3. Manage the overall risk in the fund

4. Portfolio Characteristics

The Fund does not employ direct leverage (through borrowing by the Fund) or economic leverage (through the use of derivatives). The put option hedging strategy does not create economic leverage.