In an investment world where every player claims a point of difference, it’s handy to meet one whose model is actually unique.

ANDREW MAIN

COR Capital has achieved the near impossible of having an investment strategy that is not only original and intuitive, but also works.

Davin Hood founded the firm in 2012 and was joined shortly afterwards by Tom Rachcoff. It now has north of $100m under management and that total is growing steadily.

The team has devised a model that runs four approximately equal holdings of equities, physical precious metals, bonds and cash that is enhanced by a carefully managed derivative overlay strategy.

The four quarters of the portfolio will perform differently throughout the economic cycle. The inverse correlation ensures the strategy design makes sense and the results to date prove that.

And while the Cor founders love what volatility does to their performance, they hate risk. A primary focus for the team is identifying risk at its core, protecting capital and then building value for investors.

“Our early clients asked us to ‘keep us wealthy’ rather than ‘make us wealthy’ and that’s how we invest” says Davin, who has spent 24 years in financial markets, much of that managing high net worth portfolios at global investment bank UBS. Tom is an investment professional who has over 25 years of institutional experience in financial markets.

Protecting capital is at their core.

Their aim is to maximise returns above the CPI over 3 year periods without generating a negative return over any 12 month period and their performance numbers bear that out.

Over the last 3 years, their annual returns post fees have been 9.5 per cent, not only beating the ASX200 Accumulation Index and the Macro Hedge Fund Index but with significantly lower level of volatility than either.

The COR Capital team believe that running a substantial holding in physical bullion plus a well managed derivatives position allows the portfolio to get real benefit from an asset class that is not only uncorrelated to the equities market, but also gets over the problem that bullion doesn’t pay interest.  That’s an equation which should provide wealth protection in all markets.

How well does that strategy work?  

In calendar 2017, when the gold price in Australian dollars managed a modest lift of 3.2 per cent, a careful policy of buying call and put options delivered a return for the precious metals segment of the portfolio of more than 30 per cent.

COR uses derivatives to leverage up or de-risk material holdings in gold bullion and equities.

Looking at the other side of the coin, wealth preservation, COR managers are proud of their record. Analysing the last 15 material retracements (significant down months) by the ASX200 index since early 2013, they found the index dropped a total of 55 per cent while their fund lost less than half of one percent.

  The Cor Capital Fund.  Source: Cor Capital Pty Ltd, Bloomberg, ABS.

The Cor Capital Fund. Source: Cor Capital Pty Ltd, Bloomberg, ABS.

And in only one month out of those 15 did their fund underperform the market, and that was by less than 1.3 per cent.

“Risk management is part of our DNA. We like the type of investors who are attracted to buying unpopular investments and taking a profit when they are more popular.”

What makes the COR Capital crew different is that they have a strong record of keeping a very tight rein on losses while delivering a very respectable and consistent return. In their case, an historical return of 7.2 per cent net of fees since inception.

On the same basis, COR Capital has delivered 17.7 per cent over the last twelve months to 30 June 2018, with some of the lowest volatility in Australian financial markets.

For further information on Cor Capital contact Jarrod Brown.

connect@browncapital.com.au