ASI's Investment Mandate & Philosophy

ASI is an Australian-based alternative-style equity investment manager employing and managing a proprietary investment strategy called the ‘Constructivist Investment Strategy’.  

Steering the company is ASI’s founder, Michael de Tocqueville, who together with ASI director Henry Wolfe have several decades of experience in shareholder activism in Australia, the US, and Canada.  

Michael is developing a team to employ ‘deep-value private equity style research’, to identify listed companies where value has been eroded due to one or more of the following reasons: 

• capital misallocation

• managerial deficiencies

• ineffective board structure

• improper or misaligned executive incentives

• operational under-performance

• governance issues

• strategic errors of scale or scope

ASI’s Motive

Shareholder activism is—at its core—a response to the potential for capital gains owing to the underperformance of publicly listed companies. The cause of this underperformance can be tied to a company’s relationship with absentee owners—the shareholders—otherwise known as agency risk.

ASI will seek to overcome underperformance issues stemming from agency risk by focusing on: 

• the operational aspects of company management

• advocating changes in board structure

• the dislodgement of underperforming managers

• challenging ineffective strategies, and

• making sure that merger and control transactions make sense for shareholders. 

In so doing, as the evidence shows in most cases, ASI will aim to enhance the value of companies for all shareholders. ASI’s directors have worked with (or engaged with) many companies, boards, and management in the past and will engage with more in the future.    

ASI’s Strategy and Approach 

ASI’s approach to investment is active value driven from a traditional investment point of view. We make use of the following styles and components of value investing: 

• Active Private Equity style, with

• Constructive shareholder engagement  

These are the primary investment oversights we employ to maximise value and we conduct extensive screening to identify potential targets.  

Our focus is on companies that are easy to understand. Employing this philosophy means we may pass up on a good number of opportunities for potential investment.  

We apply a disciplined, bottom-up, strategic financial evaluation and valuation processes with a long-only strategy. We have the discretion to apply shorting strategies, however only in unique cases where it may be a strategic requirement.  

Please note we will maintain significant shareholdings in only 3-5 highly attractive activist opportunities at any one time. We may hold a sub-portfolio of passive investments in a portfolio to generate yield when opportunities are limited or to balance the risk of existing holdings in more strategic investments. 

We are benchmark unaware and don’t seek to have any correlation with an index. We will be marked against the Reserve Bank of Australia's (“RBA”) cash rate with an added equity risk premium. Our return target is an annual rate of return on capital of 15% over the medium to long term.  

Where Do We Find Our Targets? 

A company may become a target of ASI for a variety of reasons but generally, most targets exhibit two characteristics:  

• they show good operating performance but are fundamentally undervalued; and

• the activist perceives some change in the capital structure, strategy, and/or governance of the target that, if implemented, has the potential to “unlock” value for shareholders.

 Who are ASI’s Clients?

ASI’s client base, as our AFSL permits, is limited to High Net Worth (“HNW”) and Sophisticated Investors, as defined by the Australian regulated Corporations Act 2001.

 How ASI operates the Constructivist Strategy

The Constructivist investment strategy is delivered to client investors via a managed investment strategy (“MIS”). ASI as a principal investor, or an investment manager, acquires shares in target companies through its Prime Broker Interactive Brokers (“IBKR”).

Shares acquired by ASI, are held in the names of its clients with ASI’s prime broker IBKR who in turn lodges the holdings with an independent custodian, BNP Paribas Group (“BNP”). Clients have complete online access to their portfolio from IBKR, which also provides administration reports as required which can also be viewed online or printed.  

As far as management fees are concerned. ASI earns its revenue through enduring portfolio management fees over the life of the client accounts managed by it. The managed accounts—depending on the type of client—will have mandatory lockup terms for the purpose of not disturbing the constructivist equity strategy.  

As mentioned previously, the client mandates are only entered into with wholesale investors as defined under the Australian Corporations Act 2001 (“Act”). ASI’s revenue base is made up of a portfolio management fee of 1.8% plus a federal goods and services tax (“GST”) of 10%. The management fee is paid monthly in arrears. There are no additional client administration or custody fees charged.  

ASI is also entitled to a 20% performance fee plus GST of 10% (also known as carried interest). The performance fee is subject to a high-water mark which ASI has currently set at 10%. The performance fee is calculated annually. That fee is also subject to review and amendment at any time, with three months’ notice given to clients. 

For more information, please contact us today.