Investment strategy
The following is a brief summary of the strategies which Kurm
Capital Management Ltd, the Investment Manager, uses to
achieve the Fund's investment objective of medium to long-term
capital growth.
Research - the fundamental tool of the value
investor
When considering potential investments for the Fund, the
Investment Manager tries to identify companies whose fundamental
value seems to be underestimated by the market. Such businesses are
not easy to locate at attractive prices; the Investment Manager
looks at many, identifying and investing in few.
Investment diversification - or
concentration
The Investment Manager does not believe that diversification, of
itself, is an important consideration within a value investment
strategy, and if few suitable investments are identified it is
possible that the Fund's portfolio might be concentrated in a small
number of investments.
Investments may be made directly or
indirectly
Since launch in 1998 the Fund has invested in managed accounts,
mutual funds, and limited partnerships run by successful value
investment managers, as well as making direct investments in
equity and other investment classes (both listed and unlisted).
The Investment Manager believes that it is just as important to
identify other investment managers whose performance shows
that they can put the principles of value investment into
practice as it is to apply those principles itself to finding
companies in which the Fund can invest directly. To that
end the Investment Manager may, with approval of the
Fund, delegate its powers to one or more investment
advisers, while remaining responsible for general
investment methodology.
Geographical/Sector spread of investments
The current allocation by industry sector and country of
incorporation/principal business operations of the Fund's
underlying investments is shown under Asset
allocation.
The Fund's operating and reporting currency is US dollars and it
is expected that the majority of the Fund's portfolio shall be
invested in US dollar denominated assets. However, the Fund may
also invest in assets denominated in other currencies or listed on
any exchange anywhere in the world.
The nature of value investment means that investment
opportunities may arise in any sector or geographical location.
Since launch the Fund has invested principally in western markets,
particularly North America, because there are more companies there
and more information is available about them. However if an
opportunity presents itself in other markets, both developed and
emerging, then it will certainly be considered if it meets the
criteria of value investment. For example, in July 2010 the Fund
made an investment in Zimbabwe.
Investment techniques which might be used
Generally, the focus of value investment is on identifying
undervalued companies and the Fund's portfolio will not contain
short positions. However value investors can and do go short when
they feel companies or sectors are overvalued and the
Investment Manager may seek to enhance the Fund's performance
or hedge a portion of its portfolio against certain risks by using
short sales, buying (and selling) covered and uncovered options on
securities and stock indices, and various other hedging
techniques.
The Fund may employ leverage by borrowing up to 100% of its
value for investment purposes. Since launch the Fund has not been
leveraged in this way at any time and indeed (to July 2011) no
facility to borrow for this purpose has been arranged.
Public and private markets
Practical liquidity considerations - the Fund is open-ended, and
investors can redeem with as little as 7 days notice - mean that,
although the Investment Manager is unconstrained in choice of
investments, the majority of the Fund will be invested in publicly
quoted, easily realisable equities - or in funds that invest in
them. Nevertheless there is some scope for the Fund to invest in
interesting unquoted companies through private equity partnerships.
Typically the investments are in mature companies, and it is
expected that their management teams will have a large proportion
of their own wealth invested, and a visible track record.
