Ann: Net Tangible Asset Backing 31st December 2015, page-14

Anyway, happy to share my view. To start, we need to recognise that we are dealing with two different types of investments here. MFF and PGF are both LICs. KAM however is a listed asset manager, just like Perpetual (PPT) or BT (BTT). They do not invest in markets directly as part of those entities. They are purely an asset management business where the only revenue and profits are as a result of running a funds management business, not from trading. So, the only way they can grow profits is by either growing FUM or cutting costs. LICs however comprise a portfolio of investments in their own right, their profits come from trading markets.

So that said, looking at KAM as a funds management business, I don't believe they are currently able to effectively complete against their peers. They are one of the smallest players from the perspective of how long they have been around. Over their 15+ year history, they have been slow to grow FUM across their various managed funds, indeed it's basically been stagnant in terms of positive net flows for several years. They lack distribution power to market their funds and the financial planning community which controls ~80% of FUM flows into managed funds are generally put off by KAM's exceedingly high fee structures, smallish scale and small team size. Neither do they have strong support from asset consultants/researchers who the planners listed to in order to make fund manager selection for their clients. From the planners point of view, they would rather commit FUM to bigger players as they see this as less risk overall. Not entirely logical, but that's how the industry works.

Sure KAM may well deliver stable profits from a base of stable FUM, but personally I like profits to grow. If KAM get a run on their funds, profits will take a hit. There is the opportunity to grow FUM directly from retail non-advised investors through their new ASX listed managed funds (KII and KSM). However this too has been very slow. KII has ~$40m in FUM, whereas MGE (Magellan's ASX listed managed fund, not MFF) is over $400m having both been around the same length of time. That's the power of the Magellan brand.

As LICs, PGF and MFF have a capital pool of capital. The can only grow FUM by doing a capital raising or DRP. I don't mean that this is easy either. But I'd back them over KAM. However I wasn't making a comparison about FUM growth between KAM, PGF and MFF as these are different beasts.

Regarding concentrated portfolio's, if I understand your question, I was just saying that Moore tends to take very concentrated bets which means the results can vary very strongly compared to the benchmark. But it varies depending on when you look at it. Has it's pros and cons. When he's right, he gets it very right. But the reverse is also true.

Does that help?