Sterling Fund

Sterling Equity maintains the perspective of a long-term business owner and considers its portfolio as a collection of companies, rather than a collection of stocks.

The portfolio is managed with a view to maximising both the quality and magnitude of sustainable underlying business earnings. We focus on the portfolio’s underlying return on invested capital, profit margin, gearing and earnings yield – these qualities are key drivers of shareholder value.

Sterling Equity seeks long-term positions in high-quality companies that it can buy at attractive prices.

Sterling Equity prefers to invest in companies with the following characteristics:

1.     Businesses that we can understand and monitor without being overly reliant on management.

2.     A competitive position that is likely to sustain strong returns on invested capital. We analyse:

• why a company’s customers do business with it and why they are prepared to pay its prices

• the likely direction of sales volume and prices, the level of industry competition and the availability of substitute products

• the relationships a company has with its suppliers, its cost structure and the barriers a competitor would face if it tried to enter the market

3.     A strong management team and board with a track record of paying dividends and/or successfully deploying capital. Management must be trustworthy, competent and motivated to create shareholder wealth.

4.     Relatively predictable earnings and an ability to at least maintain profits in most economic environments. We prefer businesses with little exposure to commodity prices, economic cycles and exchange rates.

5.     Conservatively geared.

Objective 

Sterling does not seek to outperform a particular stock market index on an annual basis. Rather, it focuses on absolute returns, and believes that a better gauge of its performance is a long-term comparison of its returns to the major Australian equity index. 

Trustee and manager

Sterling Equity Pty Ltd

Custodian 

Mutual Trust Ltd

Auditor

Morrows Audit

Fund Inception date 

1 December 2009

Suggested investment timeframe 

At least five years

Minimum investment

$AUD 500,000 (or lower amount at the discretion of the Trustee) (Wholesale investors only)

Application frequency 

Weekly

Redemption frequency 

Within 30 days of written notice by the investor

Early redemption period

Redemptions in the first 12 months of investment may be subject to a 3% penalty payable to the Fund

Distribution frequency 

Annually

The Fund provides investors with:

• a unique opportunity to access one of Australia’s best, yet largely undiscovered, investors 

• a logical, disciplined and focused investment approach

• an exceptional track record that has been produced by the current portfolio manager

• strong alignment with investors via the portfolio manager’s co-investment

Any investment involves investors assuming a degree of risk. This risk may involve losing money on a particular investment opportunity, or the opportunity not providing the returns anticipated by the investor.

There can be no guarantees that an investment in the Sterling Fund will meet an investor’s expectations.

In considering an investment in the Sterling Fund, each potential investor should consider their own risk appetite and whether the risk profile of the Sterling Fund is consistent with their investment objectives.

Listed below are a number of risk categories that potential investors should consider in deciding whether to invest in the Strategic Fund. This list is not intended to be exhaustive, and potential investors should consider other risk factors which may apply.

• Manager performance risk

• Fund strategy risk

• Market/macroeconomic risk

• Liquidity risk

• Counterparty risk

• Industry risk

• Concentration risk

• Political and legislative risk, and

• Foreign exchange risk

For further information about the key risks associated with Sterling Fund, please read the Information Memorandum.