Dear investor

This issue of the newsletter includes an update on the Fund’s portfolio and its performance for the quarter ended 31 March 2022. The Fund donated $484k to Third Link portfolio charities last quarter, bringing our total donated since inception to $16.75m. 

Third Link seeks to harness the brightest and best fund managers it can find, based on my industry knowledge and continuing active participation on multiple investment committees and investment companies. In addition, I look for skilled, active fund managers. I explain how I characterise an active fund manager below.

Thank you for investing with Third Link and allowing your fees to make a difference.

Regards,
Chris Cuffe AO, Founding Director and Portfolio Manager
Third Link Investment Managers Pty Limited

Portfolio update

The objective of Third Link Growth Fund (“the Fund”) is to provide a well-managed investment in Australian listed shares. To achieve this, the Fund extensively invests with professional third party investment managers.

As at the end of March 2022, the portfolio was invested as below:

In the quarter to 31 March 2022, the Fund also made further investments with Hamish Blanche (Netherfield) IMA, ECP Growth Companies Fund, L1 Capital Australian Equities Fund, 1851 Emerging Companies Fund and Eiger Capital Small Companies Fund.

A description of each of the fund managers we invest with can be found on our website. Each of these managers rebates their management fees and performance fees, effectively meaning they are managing the assets of the Fund for free. It is through this extraordinary generosity, together with that of other service providers, that Third Link is able to make sizeable donations to the charitable sector without diluting the returns to investors from the Fund.

Fund performance

The aim of the Fund is to outperform, after fees and over rolling five year periods, the S&P/ASX 300 Accumulation Index¹. As at the end of March 2022 the Fund performance relative to the Fund benchmark was as below:

Figures greater than one year are expressed as annual compound returns. No allowance is made for tax. The benefits of franking credits from dividends received have not been included.

¹ The S&P/ASX 300 Accumulation Index covers the largest 300 shares listed on the Australian market. Being an accumulation index, it measures changes in both the value and income of the shares.

² February 2012 reflects the date when the Fund's investment strategy changed from multi-sector growth to Australian equities.

Chris Cuffe on active fund managers

Third Link seeks to harness the brightest and best fund managers it can find, based on Chris Cuffe's extensive industry knowledge and continuing active participation on multiple investment committees and investment companies.

When selecting fund managers, their method of managing money, the market sector they operate in, experience, funds under management, key personnel and past performance under different conditions are key drivers in deciding which fund managers to use. In addition, Chris looks for skilled, active fund managers.

But what is an active manager? We asked Chris to explain.

"There are not a lot of active fund managers in Australia. You can see this from their publicly available results or via research providers like Zenith Investment Partners. I value Zenith's expertise and have sometimes added managers to the portfolio based on their analysis.

I'm looking for managers that can deliver before fee returns of 3-4% p.a. above the index over rolling five-year periods. In my view, there are not many that can consistently achieve that, so I’m always on the search.

In my experience, I would call out five characteristics that I look for in an active manager to be part of the Third Link Growth Fund.

1. A high conviction portfolio
Usually, proven active managers run high conviction portfolios, which means a smaller number of more concentrated stocks. Perhaps a couple of dozen securities or less. Essentially, these managers are taking bigger bets on fewer stocks. They are backing themselves.

2. Distinct from the index
I look for genuinely ‘independently’ constructed portfolios built with no regard to the index's composition.

3. Smaller in size
Boutique managers with relatively small amounts of funds under management best suit active funds management. It enables these managers to move around the market much easier than large managers.

4. Experienced
You can't beat some grey hair. I have trialled managers who are newer to the industry but keep coming back to managers with a track record over many years. A good manager usually has plenty of scar tissue!

5. Skin in the game
I have greater comfort if the manager has committed a significant amount of their personal wealth to the fund they are managing."

Important Information: This information has been issued by Third Link Investment Managers Pty Ltd (Third Link), ABN 31 128 965 702, AFSL 321311 as investment manager of the Third Link Growth Fund (the Fund). This information provided is general information only. It does not constitute financial, tax or legal advice or an offer or solicitation to subscribe for units in the Fund. This information has been prepared without taking account of your objectives, financial situation or needs. Before acting on the information or deciding whether to acquire or hold a product, you should consider the appropriateness of the information based on your own objectives, financial situation or needs or consult a professional adviser. There can be no assurance that the Fund will achieve its targeted rate of return and no guarantee against loss resulting from an investment in the Fund. All investments carry risks. Past fund performance is not indicative of future performance. Bennelong Funds Management Ltd (BFML), ABN 39 111 214 085, AFSL No. 296806 is the Responsible Entity for the Fund. Applications can only be made on the application form dated 1 December 2020 accompanying the Fund Product Disclosure Statement (PDS) dated 1 December 2020. Potential investors should consider the PDS and the Additional Information to the PDS (AIB) before deciding whether to invest, or continue to invest in the Fund. The PDS and AIB can be obtained from www.thirdlink.com.au or by contacting Third Link.

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