TANTALLON CAPITAL PHILOSOPHY

 

Investment Philosophy

We believe that the Asia Pacific region will remain a critical driver of the global economy.

Our investment universe embraces both the developed markets of Japan and Australia, and the emerging markets of China, Northern and South East Asia. There are attractive investment opportunities in these markets and we identify the best through constant travel and relentless research.

We run a concentrated portfolio of typically 35 names holding only our strongest investment convictions.

We conduct intensive on-the-ground fundamental research while continuing actively to engage counterparts in the securities industry. Our investment process is characterized by a high level of company and industry contact.

Identifying critical investment themes, combined with company visits and research calls with a broad community of industry contacts, as well as frequent investment discussions supported by quantitative analysis remain the fundamental building blocks to our investment portfolios.

We believe that since markets are comprised of individual investors, attention paid to market consensus and what is implicitly discounted in market prices remains an important driver to market valuation of individual companies.

 

Mission

We aim to achieve superior long term results through in investment in a concentrated portfolio of securities with a typical holding period of 3-5 years.

Our priority and focus is results, not asset growth.

We are substantial investors in the fund ourselves, aligning our interests with those of our clients.

We hope to emerge as trusted partners over the long term.

 

Risk Management

For much of the life of the fund, largely in response to client demands, we operated an increasingly complex matrix of position limits, country limits, stop losses and draw down policies. These policies were inherently pro-cyclical, reducing our exposure as markets fell, but ensuring that we were under-exposed when markers rallied. The cumulative effect of this attempt to keep net exposures in the 40-60% range was guaranteed alpha destruction, while lower volatility and reduced downside failed to satisfy demands for positive returns in weaker markets such as those of 2008.

We have accordingly re-thought and jettisoned our previous risk management procedures. The crucial decisions in risk management are in the pre-trade area, not post-trade; risk reduction trades are invariably reactive. Abandoning a commitment to a targeted net exposure level reduces the potential for mistakes. Our one hard and fast risk limit is our gearing limit of 200% of NAV, which we may use both to reduce and to raise net exposure.

We would expect the volatility of the fund to rise, but believe this is an acceptable trade-off in the pursuit of higher returns.