Why Does DMX Capital Partners Generate Positive Absolute Returns Even When the Market Falls?

We have recently had a few questions regarding the fund’s very low correlation with the broader market, and why the fund tends to generate positive absolute returns (on average) when the market falls. By way of background, the fund’s correlation with the All Ords since launch 22 months ago is under 3%. And in the 11 of those 22 months when the market fell, DMX Capital Partners averaged a positive absolute monthly return of 2.2%, and an average monthly relative out-performance of the All Ords of 5.4%.

1. In our opinion there are a few clear reasons:
   1. We are investing in largely unknown and undiscovered smaller companies which are generally ignored by the broking community and broader market. By focusing on these undiscovered stocks with high upside potential and low downside risk, the fund is well placed to “do its own thing” rather than trade in line with the market.
2. We are disciplined value investors. By investing in companies with a significant margin of safety we are generally avoiding the stocks which tend to sell off the most during periods of market weakness; the highly valued growth stocks.
3. DMX Capital Partners has a cash weighting in excess of 20% which both provides protection during periods of market weakness, and also allows us to remain on the front foot if opportunities emerge in our shortlist of high conviction stocks.
4. DMX Capital Partners comprises only our 15 highest conviction stocks. We believe this is a key strength since in our experience many fund managers build larger portfolios which contain lower conviction stocks and thus create the risk of a “tail” of under-performers which often limits out-performance potential.

To view the latest DMX Capital Partners presentation please download the document below.

Presentation

We are currently open to inflows into DMX Capital Partners. For those who would like to invest or top up (both within and outside of super) please register your interest by clicking on the button below.