Constantia Investment Partners

Too frequently we hear the phrase: "The service ain't what it used to be." A recent discussion with an investor emphasized the continuing relevance of traditional personalized service. Despite this, it appears that many businesses place less emphasis on this approach in today's highly transactional world - one hyper-focused on optimising for efficiency. Click below to read on: https://lnkd.in/g-PzT565

We are pleased to share our Quarterly Note for the 3rd quarter of 2024. We provide a brief update on changes made to the Fund since 30 June 2024 (spoiler alert: not many), as well as the usual update to our Quality Scorecard, the list of top ten holdings, and allocation charts. We generally believe that we would only add to the unhelpful level of noise by providing real-time commentary on what is driving markets ‘in the moment’. We prefer to stand back and see if we can discern truths that could have a more lasting impact. The main focus of our brief quarterly note adopts the somewhat heretical idea (put out into the world by Amazon founder Jeff Bezos, of all people) that ‘investing in change’ may not be all it’s cracked up to be. Please click through below or visit https://lnkd.in/gjUnZKVF to read more. ---- The Trust Company (RE Services) Limited (ABN 45 003 278 831, AFSL 235150) is the issuer of the product. For general advice only and does not take account the objectives, financial situation or needs of investors. Read the PDS and Target Market Determination (TMD) (available at https://lnkd.in/gVhK3cCz) to see if the product is right for you. All investments contain risk and may lose value.

Many of our partners will have interacted over the years with Les Andrews – our inimitable chief executive and problem-solver at large. While admittedly biased, we believe Les is very good at what he does. What may be less well known is that he is also (in the words of a good friend of the firm) an ‘absolutely first-class bloke’. Over his career, Les has always been quick to lend an ear (or – frequently – a hand) to anyone in our industry needing advice. This help has taken many forms: from being a mentor to countless entrants starting out, through to sitting down and explaining the ins and outs of some arcane bit of operational knowledge to someone trying to set up a risk management process (or, indeed, a whole new fund manager from scratch), always with the goal of professionalising our industry. At the 2024 AIMA - The Alternative Investment Management Association Australian Alternative Investment Awards – held last night – Les was recognised for his tireless, decades-long effort to be of service to all who crosses his path with the ‘Contribution to the Australian Hedge Fund Industry’ award. We are extremely lucky to have Les at Constantia (particularly at the time in his life when the siren song of the golf course is justifiably strong!) We’d argue that his dedication to providing best-in-class service to our clients – all while being a first-class bloke, in every sense of the word – is a great asset to our partners as well. The award could not have gone to someone more worthy, in our opinion. Congratulations, Les. https://lnkd.in/gX26_DNn

Considering the wide range of issues that equity markets focus on, there is an incredibly narrow range of topics we feel qualified to opine on in a public forum. Constellation Software Inc. has been the largest holding in our Fund for several years, and prior to our purchase of the stock in 2021 - when markets offered us an opportunity to do so with a margin of safety - we had followed it for nearly a decade. As such, Constellation falls into the (very!) narrow range of topics where we have - to quote the late Charlie Munger - 'done the work required to have an opinion'. Vertical market software (VMS) businesses are inherently cash-generative, capital light, and have at least one moat in the form of switching costs. Constellation builds on the natural advantages of all VMS businesses through an extremely unique and highly aligned incentive structure. In combination with a value-based, base-rate driven approach to M&A, this has resulted in a decades-long track record of disciplined capital allocation that has underpinned an extraordinary track record of value creation for shareholders. We believe it has a bright future ahead of it. Thank you to The Australian Financial Review for including our perspective on Constellation in this piece. https://lnkd.in/gh_rteA4 ---- The Trust Company (RE Services) Limited (ABN 45 003 278 831, AFSL 235150) is the issuer of the product. For general advice only and does not take account the objectives, financial situation or needs of investors. Read the PDS and Target Market Determination (TMD) (available at https://lnkd.in/gVhK3cCz) to see if the product is right for you. All investments contain risk and may lose value.

At the end of August, our fund strategy achieved its 5-year milestone. To celebrate - and in keeping with the times - we thought to use generative AI to create a picture of a birthday cake in the Constantia colours with "five candles". (The result - which can be seen below - features eight candles and the number five occurring twice on the same cake...) In monthly note below, we briefly summarise the (unusual) markets of the past five years. Thank you to all our investors for your patient support on the journey with us. We look forward to the road ahead. https://lnkd.in/gwcaFTqE

We are pleased to share our 2024 Interim Letter, covering the fundamental performance of our businesses for the first six months of the year, and how this has translated to the outcome we have delivered to our investors. Additionally, we provide an update on changes made to the Fund since 31 December 2023. Finally, we take readers on an offbeat exploration of some of the most common psychological biases that all investors exhibit and must work to overcome. Please click through below or visit https://lnkd.in/gjUnZKVF to read more. ---- The Trust Company (RE Services) Limited (ABN 45 003 278 831, AFSL 235150) is the issuer of the product. For general advice only and does not take account the objectives, financial situation or needs of investors. Read the PDS and Target Market Determination (TMD) (available at https://lnkd.in/gVhK3cCz) to see if the product is right for you. All investments contain risk and may lose value.

Please join us for our mid-year webinar at 12:30PM (AEST) on 23 August 2024. The team will discuss the underlying performance of our investments for the first half of the year, current portfolio positioning, and how we see markets at present. To register, please follow the link below: https://lnkd.in/e6weuy5V

AI: Artificial Intelligence or Absolute Insanity? Recent weeks have shown the first signs of the market questioning how much money can be made from all the spend on AI infrastructure. Mark Zuckerberg (Meta's CEO) in a recent interview with Bloomberg provided a glimpse as to how much uncertainty exists: 'I do think there’s a meaningful chance that a lot of companies are overbuilding now, and you’ll look back and say, ‘oh, maybe we all spent some number of billions of dollars more than we had to.’ Is it a bubble, or is anyone actually using AI in a way that the hyperscale infrastructure providers can make money off it? Read the full article below: https://lnkd.in/gfyBuqis

After a brief service disruption during April, the AI-led market rally returned in force during the month of May. In combination, the Magnificent 7 group of AI-winners contributed roughly +1.5% to the overall market return of +2.0%. Said differently, just seven stocks accounted for around 75% of the market return this month (and one stock alone for about 40%). In terms of the market structure driving returns, this was an exceedingly lopsided month. Our approach to this kind of market is to focus on the bottom-up. Given their somewhat tortoise-like growth rates in cash earnings (a 'mere' 12 to 15% per year, by our forecasts) when compared to some of the AI-winners haring ahead, we are not particularly surprised to see a few of our businesses being somewhat out of fashion while many market participants aggressively look to buy the Next Big Winner. For the avoidance of doubt, we would take a highly reliable double-digit growth in cash earnings over a more speculative, higher-growth opportunity any day of the week. The durable growth of the former is our wheelhouse, whilst the allure of rapid growth and multiple expansion of the latter is a game we do not believe we can reliably play and win. We expand on this topic in greater detail below. Subscribe to Constantia’s insights at: https://lnkd.in/gi34KyxS ---- The Trust Company (RE Services) Limited (ABN 45 003 278 831, AFSL 235150) is the issuer of the product. For general advice only and does not take account the objectives, financial situation or needs of investors. Read the PDS and Target Market Determination (TMD) (available at https://lnkd.in/ghHtnMuf) to see if the product is right for you. All investments contain risk and may lose value. Any opinions, forecasts, estimates or projections reflect judgments of the investment manager (Constantia Investment Partners) as at the date of this publication, and are subject to change without notice. Rates of return cannot be guaranteed and any forecasts, estimates or projections as to future returns should not be relied on, as they are based on assumptions which may or may not ultimately be correct. Actual returns could differ significantly from any forecasts, estimates or projections provided. Past performance is not a reliable indicator of future performance.