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NAOS Asset Management is a specialist fund manager providing genuine, concentrated exposure to quality private & public emerging companies.
With a proven performance track record, NAOS seeks to protect investor capital whilst providing a sustainable stream of dividends, franked to the maximum extent possible, and long-term investment performance above the relative benchmark index.
NAOS established its first Listed Investment Company (LIC) in 2013 with 400 shareholders, today NAOS manages three LICs and one private investment fund for approximately 6,500 investors.
NAOS directors and employees have a significant interest in all three LICs, this means we are invested alongside our shareholders creating strong alignment of interests. In addition, more than 80% of NAOS Asset Management Limited is owned by Staff and Directors.
NAOS is a signatory to the United Nations-supported Principles for Responsible Investment (PRI) and employ an Environmental, Social and Governance (ESG) screen across all its investments, an approach we firmly believe contributes to protection of our shareholders capital and sustainable long term investment performance.
The team is led by Sebastian Evans, Chief Investment Officer and Managing Director. Supporting Sebastian is a group of experienced investment and support professionals and a deeply experienced and well credentialed Board of Directors.
Rather than follow the crowd, we prefer to pave the way with innovation and provide a better outcome for our stakeholders. We have a disciplined investment process and do not get caught up in the hype and noise of the market.
At NAOS, we focus on providing concentrated exposure to quality public and private emerging companies – and we strive to be the best at this.
At NAOS, we are honest and transparent. We continue to exist due to the earned trust of our shareholders.
Each NAOS employee has been specifically chosen for their unique ability, proven experience and willingness to learn. At NAOS, we have created an inclusive work culture and one that supports all our employees.
As NAOS Directors and employees, we have a significant interest in NAOS’ investment strategies. This means we are invested alongside our shareholders, creating a strong alignment of interests.
We believe in investing in businesses where the earnings today are not a fair reflection of what the same business may earn over the longer term. Prior to investing in a business, we ask ourselves: Do we want to own this business forever?
We are responsible for investing our fellow shareholders’ funds and we do not take this responsibility lightly. At NAOS, we seek to always act responsibly and diligently in all matters – from our investment choices through to our shareholder communications.
NAOS employees strive to make NAOS a success by taking ownership of their tasks and responsibilities. In addition, NAOS Asset Management Limited is majority owned by employees and Directors.
As a company, we have committed to pledge 1% of our revenue, time and knowledge to movements and missions that matter. We want to make a difference, and aim to contribute to economic, social and environmental improvement.
With five large banks and two major mining companies making up 40% of the ASX-100 by market capitalisation, many Australian equity investors are at risk of being overexposed to these two sectors and may be missing out on opportunities to invest in quality companies in industries such as Media, Advertising, Agriculture or Building Materials. Companies outside the ASX50 and within our circle of competence are our core focus, and we believe the LICs we manage provide pure access to these companies which are potentially less well known by the broader investment community.
We believe in backing people who are proven and aligned with their shareholders. One of the most fundamental factors which is consistent across the majority of company success stories in our investment universe is a high quality proven management team with ‘skin in the game’. NAOS Directors and staff members are significant holders of shares on issue across our strategies, so the interests of our shareholders are well aligned with our own.
NAOS place primary emphasis on protecting investors’ capital and to that end have the flexibility to hold up to 100% of the portfolio in cash, as it has been proven that holding cash offers the ‘best hedge’ during times of crisis. Since inception NCC and NAC have experienced significantly more positive monthly returns than their relative benchmarks and when we have experienced a negative month, the statistics show we were better at retaining capital compared to the broader market over the longer term.
We are committed to capping our fund sizes in order to maximise potential shareholder return. This approach ensures we are nimble enough to access meaningful positions in quality companies where other funds may be too large to participate.
Our closed end LIC structures provide an effective vehicle for long term concentrated investing as we are not forced into buying or selling to meet applications or fund redemptions for investors. This means we can set our own time frame for investment and we are able to provide patient capital to companies. This can create access to investment opportunities where the short term investor with fluctuating capital may be unable to act upon in the same way.
Facilitating open and transparent dialogue with our shareholders is necessary for investors to make informed decisions. NAOS believes in providing current and future shareholders with high quality, timely and constructive information via our shareholder communication activities. These initiatives include annual investor roadshows across Australia, monthly NTA reports, insights newsletters and quarterly investor webinars.
LICs are structured to maximize effectiveness when it comes to the consistency and regularity of dividend payments.
NAOS is a signatory to the United Nations-supported Principles for Responsible Investment (PRI) and employ an Environmental, Social and Governance (ESG) screen across all its investments, an approach we firmly believe contributes to the protection of our shareholders capital and sustainable long term investment performance.
We believe in investing in businesses where the earnings today are not a fair reflection of what the same business will earn over the longer term. Ultimately, this earnings growth can be driven by many factors, including revenue growth, margin growth, cost cutting, acquisitions and even share buybacks. The result is earnings growth over a long-term investment horizon, even if the business was perceived to be a value-type business at the time of the initial investment.
Excessive diversification, or holding too many investments, may be detrimental to overall portfolio performance. We believe it is better to approach each investment decision with conviction. In our view, to balance risk and performance most favourably, the ideal number of quality companies in each portfolio would generally be zero to 20.
As investors who are willing to maintain perspective by taking a patient and disciplined approach, we believe we will be rewarded over the long term. If our investment thesis holds true, we persist. Many of our core investments have been held for three or more years, where management execution has been consistent and the value proposition is still apparent.
We believe in backing people who are proven and aligned with their shareholders. One of the most fundamental factors consistent across the majority of company success stories in our investment universe is a high-quality, proven management team with “skin in the game”. NAOS Directors and employees are significant holders of shares on issue across our strategies, so the interests of our shareholders are well aligned with our own.
This means we are not forced holders of stocks with large index weightings that we are not convinced are attractive investment propositions. We actively manage each investment to ensure the best outcome for our shareholders, and only invest in companies we believe will provide excellent, sustainable, long-term returns.
As a specialist fund manager since 2004, over the years NAOS has developed a strong “circle of competence” (or mental models) in specific industries. We openly acknowledge we avoid businesses that are either too complex to understand, or heavily influenced by one or two variables, such as interest rates or commodity prices. Instead, we concentrate on businesses that fall within our circle of competence, aiming to minimise the risk of permanent capital loss. Unlike others, we are comfortable setting aside investments that we consider “too hard”, while we compound our knowledge in specific industries where we believe we have a competitive edge.
We believe in taking advantage of inefficient markets. The perceived risk associated with low liquidity (or difficulty buying or selling large positions) combined with investor short-termism, presents an opportunity to act based purely on the long-term value proposition, where the majority may lose patience and move on. Illiquidity is often caused by aligned founders or management having significant holdings in a company. The NAOS LICs benefit from a closed-end structure, which means they do not suffer “redemption risk” and we can focus on finding quality, undervalued businesses regardless of their liquidity profile.
As an investment manager, NAOS recognises and accepts its duty to act responsibly and in the best interests of shareholders. We believe a high standard of business conduct and a responsible approach to environmental, social, and governance (ESG) factors is associated with a sustainable business model over the longer term. This benefits not only shareholders, but also the broader economy. NAOS is a signatory to the United Nations-supported Principles for Responsible Investment (UNPRI) and is guided by these principles in incorporating ESG into its investment practices. NAOS is also B Corp certified.
At NAOS, we seek to work collaboratively with businesses and their respective management teams. We are often the largest shareholder in the businesses we invest in, and from time to time we will seek board representation, either via an independent or a non-independent representative. This approach allows us to supportively engage with the boards and/or management teams of our portfolio holdings, and maximise the potential for our invested capital to compound at a satisfactory rate over the long term.
Examples of constructive engagement where the NAOS investment team looks to add value include:
Important Information: This material is provided for general information purposes only and must not be construed as investment advice or a recommendation. It does not take into account the investment objectives, financial situation or needs of any particular investor. Before making an investment decision, investors should consider obtaining professional investment advice that is tailored to their specific circumstances. Past performance is not necessarily indicative of future results and there is no guarantee that future performance, the amount or timing of any returns or that the investment objectives will be achieved.
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