Sigma Select Advantage

Sigma Select Advantage

The best Large Cap and Small Cap ideas all in one Fund

Sigma Select is a high conviction, broad-cap, value strategy that fully leverages Sigma’s Australian Equities capability. Select combines the highest conviction stock positions from Sigma’s Large Cap and Small Cap investment teams into a single, focused portfolio.

The Select strategy opportunity is driven by Sigma’s unique business and investment structure:
  • A) Two specialist investment teams, focused on Large and Small Cap
  • B) Common, integrated, investment approach and philosophy
  • C) Full team alignment through an equal ownership business structure.
Select has achieved consistent, through-the-cycle outperformance reflecting the benefits of an integrated, specialist approach to accessing skilled Large and Small Cap capabilities.

The Sigma Select Advantage offers superior outcomes across the following key attributes;-

Efficiency

The Select strategy implements Sigma’s highest conviction ideas across two investment teams through a focused 20-40 stock portfolio. Following consideration from the full market spectrum of investment opportunities, capital is allocated to a select number of attractively valued companies on a risk-adjusted basis.
 
Small Cap implementation through Select is uniquely efficient given a capability to pick individual stocks for the portfolio rather than investing in the entire Small Cap portfolio. Picking individual small cap stocks leads to higher conviction positions, intended diversification and limited portfolio redundancy. As a result, limited capital is deployed efficiently resulting in significantly higher outperformance from this component of the portfolio.

Diversification

The Select strategy has an investment universe approximately double the size of a typical Large Cap strategy. A wider investment universe improves consistency of performance through the benefit of superior diversification. As a result of accessing more investment opportunities Sigma is able find cheaper, lower risk alternatives for the portfolio thereby raising returns while reducing risk.

Risk Management

Sigma’s Select approach provides risk management benefits through systematically avoiding the risk of allocating to overpriced assets. Rather than having a strategic or passive allocation to Small Caps or Mid-Caps with less regard for valuation and risk, the Select approach only invests in these areas of the market when attractive risk-adjusted return can be found through individual stocks. The strategy through regular, systematic comparison of stocks and sectors across the market spectrum is able to manage sector ‘beta risks’ in a timely and low cost fashion within a bottom up framework.

Flexibility

Select has the advantage of superior flexibility to maximize the opportunity from Sigma’s investment capability. The strategy’s flexibility builds conviction in Large Caps through high active stock limits, has the opportunity to invest up to 25% of the portfolio in Small Caps and has the option where equity risks are high to run cash levels up to 25% of the portfolio. Select’s flexibility reinforces Sigma’s risk management discipline by driving both an absolute and relative approach to portfolio construction thereby avoiding expensive assets that can only be justified on relativities.

Alignment

Select offers a broad-cap approach that is well aligned to investors’ Australian Equity objectives. An important benefit is an investment focus on the total portfolio outcome measured relative to the broad ASX300 benchmark. In the case of Small Caps and Mid-Caps, the Sigma teams through comparison against Large Cap alternatives, only select stocks that are attractive versus the ASX300 rather than a less aligned Small Cap or Mid Cap benchmark. This approach avoids the problem of delivering outperformance against a subset benchmark yet failing to contribute superior performance to the total investor portfolio.

DISCLAIMER: This document was prepared by Sigma Funds Management Pty Limited (ACN 137 097 075, AFSL 339901) (‘Sigma’). Sigma does not give any warranty as to the accuracy, reliability or completeness of the information contained in this document, and any persons relying on this information do so at their own risk. This document is provided for general information purposes to wholesale clients only. Accordingly, reliance should not be placed on this commentary as the basis for making an investment, financial or other decision. This document has been prepared without taking account of any person’s objectives, financial situation or needs, and because of that, any person should before acting on the information, consider the appropriateness of the information having regard to the their objectives, financial situation and needs. Past performance is not a reliable indicator of future performance. The Information Memorandum (IM) should be read in full before investing in the fund and is available upon request. © Sigma 2016.
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