July 2020 Totus Capital Pty Ltd (ABN 151 2 772) AFSL: 409468
Why Totus Capital? Totus is an independent investment firm managing funds on behalf of high net worth individuals, platform unitholders and family offices Totus manages the Totus Alpha Fund. A limited capacity ($500m soft close ), absolute return offering concentrating on Long and Short equity ideas in Australia as well as the US Diversified fundamental stock picking portfolio with emphasis on generating positive attribution from long book and short book The Portfolio Manager and investors are highly aligned via significant personal investment in the fund Experienced award winning team Proven investment strategy that has delivered 16.0% * per annum net of fees since April 2012 Returns are uncorrelated to Australian and global share markets 2 *Past performance is not a reliable indicator of future performance
Recent Totus Developments 2018 Australian Market Neutral Fund Of The Year winner (Hedge Fund Rocks) Over $250m of Assets Under Management (AUM) Launched Cayman vehicle for non Australian domiciled investors Highly experienced COO hire (Tony Hammond – started Feb 2019) New analyst hire (Tim Warner – started June 2019) Launched Totus Alpha Fund strategy in PDS format (April 2020) 3
Award Winning Investment Team Ben McGarry (Portfolio Manager) has 19 years of financial markets experience on both the buy and sell side of the industry. As an analyst at UBS Australia and Morgan Stanley in London, Ben covered a broad range of companies and sectors. Ben also qualified as a Chartered Accountant with PricewaterhouseCoopers in Sydney. Sam Granger (Portfolio Manager) joined Totus Capital in 2014, having previously worked at NAOS Asset Management as an emerging companies analyst. He holds a Bachelor of Commerce (Liberal Studies) degree from the University of Sydney. Tim Warner (Analyst) joined Totus Capital in 2019, having previously worked at Centennial Asset Management as an analyst for 2 years, focusing on ASX small and micro- cap companies. Tim holds a Bachelor of Chemical Engineering (Honours Class I and the University Medal) degree from the University of Sydney. 4
Organisational Chart Tony Hammond Kym Reynolds Ben McGarry Chief Operating Executive CEO Officer Assistant Investment Finance and Distribution Team Operations Ben McGarry Sam Granger Andrew Aitken Antonia Connolly* Tim Warner Head of Portfolio Portfolio Bookkeeper Analyst Manager Distribution Manager Joanne Cupples Client Services 5 *Antonia works part-time
Superior Scalable Long-Term Returns (Since inception April 2012 to June 2020 – net of fees) Totus Alpha Fund FUM ASX300 Accum Rolling (pa) Totus Alpha Fund Outperformance Index $300,000,000 1 -3.3% -9.7% 6.4% $250,000,000 2 -0.8% 1.1% -1.9% $200,000,000 3 9.7% 5.4% 4.2% 4 5.5% 5.8% -0.4% $150,000,000 5 8.2% 5.2% 3.0% $100,000,000 6 12.0% 5.3% 6.7% 7 15.4% 6.8% 8.6% $50,000,000 8 16.7% 8.6% 8.1% $- Since Inception 16.0% 8.2% 7.8% 2012 2013 2014 2015 2016 2017 2018 2019 2020 6
Performance Quality (Since inception April 2012) Totus Alpha Fund ASX300 Accum. Index Alpha (per annum) 7.8% Beta -0.12 Correlation -0.11 Sharpe Ratio 0.93 0.46 Sortino Ratio 1.80 0.66 Avg monthly return 1.3% 0.7% Avg return in ASX up month 1.5% 2.8% Avg return in ASX down month 1.0% -3.4% Up months 61% 67% Down months 39% 33% 7
What is the Totus Capital Edge? Totus materially outperforms in down markets Totus also delivers solid returns in up markets Short book has been a consistent source of alpha generation Combination has delivered superior uncorrelated risk adjusted returns over 8 years Average Performance in Up/Down Markets Performance in Up Market Performance in Down Market 4.00% 2.79% 3.00% 2.00% 1.53% 0.95% 1.00% 0.00% -1.00% -2.00% -3.00% -3.41% -4.00% Totus Alpha Fund ASX 300 Accum Index 8
Performance in the fifteen WORST ASX Months Totus Alpha Fund rose in 10 out of 15 worst months since inception (April 2012) 10.4% 4.1% 6.3% 6.1% 6.1% 3.0% 0.7% 1.0% 1.8% 1.0% 2.1% -0.6% -2.7% -2.0% -2.4% -1.0% -2.9% -3.0% -1.4% -3.2% -3.7% -4.2% -4.5% -5.3% -5.4% -5.4% -5.9% -6.2% -6.7% -7.8% -7.7% -20.8% Mar-20 Feb-20 Aug-15 May-12 Oct-18 Jan-16 Sep-14 Jun-15 May-13 Mar-18 Nov-14 Jan-14 Sep-15 May-17 Jun-16 Average Totus Alpha Fund ASX 300 Index (incl. dividends) 9
Performance in the fifteen BEST ASX Months Totus Alpha Fund rose in 10 out of 15 best months since inception (April 2012) 12.1% 9.0% 8.8% 6.9% 6.4% 6.0% 5.3% 5.3% 5.3% 5.4% 4.9% 4.9% 5.0% 4.8% 4.6% 4.3% 4.3% 4.4% 4.4% 3.7% 2.7% 1.1% 1.4% 2.7% 1.5% 0.8% -1.4% -0.2% -2.2% -3.5% -6.2% -13.9% Jul 15 Dec 16 Jul 14 Oct 15 May 20 Mar 16 Jan 20 Feb 14 Jan 13 Feb 13 Jul 13 Feb 19 Jul 16 Feb 15 Apr 20 Average Totus Alpha Fund ASX 300 Index (incl. dividends) 10
100% 150% 200% 250% 300% 350% -50% 50% 0% Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Portfolio Exposure Jan-15 Net exposure Apr-15 (% of net assets) Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Gross exposure Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 11
Investment Philosophy Totus = whole, all, entire, total, complete, every part Markets are inefficient allowing opportunity for active stock pickers to add value In the long term prices of stocks will gravitate towards intrinsic business value, which is a function of prospective free cash generation Bottom up, forensic analysis of financial statements (balance sheet, cashflow and profit & loss) will identify opportunities on both the long and short side Analysing a company from the “entire, whole, complete” rather than being beholden to concepts of “value” or “growth” generally results in optimal investment outcomes Portfolio’s designed to avoid gearing (at a net level), excessive concentration and illiquidity This philosophy results in a portfolio of stocks with the following characteristics: Long Short Tailwinds Headwinds High quality earnings Low quality earnings Cash Trash Delivery Hype Simple Complex 12
Investment Process Long Short 1000 stocks Investible Universe: ASX300 + S&P 500 + select global mega caps Initial Filtering Screened Universe: Screened Universe: n 750 stocks Quant screening of market cap, + Availability of borrow liquidity, earnings quality, Valuation Structural Themes Researchable Universe Researchable Universe Totus themes then eliminates stocks Totus themes then eliminates stocks 300 stocks to a manageable universe of circa 300 to a manageable universe of circa 300 stocks stocks Bottom Up Stock Selection Portfolio Construction Portfolio Construction The bottom up research and Portfolio The bottom up research and Portfolio construction process construction process 90-120 stocks 40- 60 longs 50-70 shorts The investment process allows for widest universe of opportunities so that the portfolio can be protected through all market cycles 13
ESG Considerations for Long Investments Environmental Sustainable long-term business models Totus Totus Long Investment Investments s Governance Social Shareholder alignment Respect for key stakeholders Strong board oversight Transparent disclosure/accounts 14
Historic Shorts and Future Opportunities 1000 Valeant 100 Pharmaceuticals Uber Tesla WeWork Peak Market Cap ($b) Domino's Pizza 10 Vocus Slater & Gordon Energy World Linc Energy Syrah Resources Speedcast ASX Listed BWX Liquefied Natural Gas Coalspur Mines 1 Blue Sky Gunns Retail Food Group Quintis New Century Resources Maverick Drilling GetSwift Australian Careers Network Dicksmith Guildford Coal Pioneer Credit Buccaneer Energy 0.1 2011 2012 2014 2015 2016 2018 2019 2021 15 Historic Opportunities
Portfolio Construction and Positions Weight themes in portfolio based on: - level of conviction - maturity of the theme - number and liquidity of relevant companies exposed to the theme Rebalance portfolio and modify targets based on market conditions Buy dips on good companies with tailwinds Sell rallies in poor companies facing headwinds Typically 100+ positions – (this is a guide only as to the average number of positions) 15% (net) hard limit at cost long book 5% (net) hard limit at cost short side Gross up to 325% (average 225%) Net < 150% (average 34%) Listed Australian and Developed Market equities (mainly US) 16
Structural Themes To further refine the research effort the team identify medium to long term investment themes Attempt to identify 5 or 6 themes on the long side and 5 or 6 themes on the short side Examine contrasting views on the industry i.e. understand the bull vs the bear case Assess market positioning. Where are we in the lifecycle of the theme or trend? Assess risks to our view. Ask the question, where could we be wrong? 17
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