Cuffe’s checklist for picking great fundies

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Livewire recently caught up with industry veteran Chris Cuffe to get his candid views on the attributes he values most when selecting fund managers. This article covers Cuffe’s key criteria, important metrics and some of the funds he is backing today.

 

Edited transcript of interview with Chris Cuffe 

It’s about the individual not the brand

I never follow funds management firm brands - I'm interested in the individual. I'm very interested in the past track record, in fact, it amazes me that most legal documents say past performance should not be relied on, or looked at for a guide to the future. I can't think of anything better to rely on; I want to see a snail-trail of how the manager has worked - across different market environments - to understand how they work. 

Look for managers who are truly active 

In my experience over many years, not many managers can truly add active value. They do exist, but there's not as many as perhaps have their shingle up saying they can do it. So I'm very selective. 

I'm looking for managers who actually go out and try and swing the bat. There's no point using a manager who is trying to get a little bit at the margin. I'm only interested in managers who give it a ‘proper go’; and those managers either going to do really well, or really badly. It's just a matter of experience in finding those people who do really well. 

Look for certain traits in the individual 

Great fund managers are often a ‘little quirky’ in some areas, and that's because they're obsessive about their trade. I've always said the weirder fund managers are, the better they are. And those who do really well generally have a bit of grey hair!

I've always said the weirder fund managers are, the better they are!

Cuffe’s Checklist 

  • Assess past performance: Past performance is essential to demonstrate how they have performed in different market cycles.
  • Seek meaningful outperformance: Ignore modest ‘performance at the margin’, and seek the few managers achieving genuine alpha, i.e.: 3-4% outperformance of an index.
  • Ignore the short-term numbers: Ignore 3-month or 1-year returns. Only start to look after 3 years. Wait for five years before deciding to withdraw from a manager.
  • Review rolling 5-year periods: Essential to look for managers who can perform over rolling 5 years periods. 

Who is Cuffe backing today? 

Cuffe points to the managers he has selected for his charitable venture, the Third Link Growth Fund. It is a ‘fund of funds’ where the managers provide their services ‘pro bono’ and the proceeds are donated to charity. Names include: 

  • Ophir Asset Management
  • Cooper Investors
  • Harness Asset Management
  • L1 Capital
  • Lennox Capital Prtners
  • Paradice Investment Management
  • Montgomery Investment Management
  • Pengana Capital 

EGP Capital 

Recently Cuffe has also invested in and joined the board of EGP Capital. EGP charges no management fee and instead only charge a performance fee.

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Disclaimer: The information contained in this presentation is general in nature and should not be relied upon. Before making any investment of financial planning decisions, you should consult a licensed professional who can advise you whether the decision is appropriate for you. Contributors to this show may have commercial or financial interests in the companies mentioned.


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