In the lead up to this week’s The Insider: Meet the Fund Manager, Anthony Murphy from Lucerne Investment Partners sat down with Reach Markets to provide a bit of information about  his investment strategy, industries of interest and discusses the wholesale Lucerne Select Alpha Fund (LSAF) that is targeting annual returns of 20% across a rolling five year period.

Lucerne Investment Partners has developed an evidently effective investment process that has resulted in risk-adjusted, market-beating returns. The Lucerne Alternative Investments Fund (LAIF) allocates investor funds to best-in-class fund managers, while the Lucerne Select Alpha Fund (LSAF) obtains access to the best ideas from Lucerne’s select fund manager and professional investor network and is on track to deliver on it’s return target of net 20%+ p.a. over five years.  

As at 31st May 2023, LAIF racked up a 3 year annualised return of 15.45%, compared to the ASX 200 Accumulation Index’s (AXJOA) 11.43%. What is arguably more impressive, is that LAIF has generated these returns with annualised volatility of 7.17%, compared with 13.50% for the AXJOA over the same period.

LSAF gets access to the types of deals you get a glimpse of in the AFR after the fact, where a few high profile family offices and private institutions have cornerstoned a raise for a private company with clear growth prospects. The fund finished 2022 up 17.91% for the year, and has annualised 18.5% since inception (1 Oct 2021) to 31 May 2023.

The fund has a very broad mandate, given the equally broad range of fund managers with various underlying strategies that Lucerne invests in. LSAF is targeting companies and management teams with a unique edge and strong upside potential, that have clear growth catalysts and tangible liquidity prospects within 2-5 years from a realisation event.

LSAF took a position in Red Earth in 2021, a company that produces battery storage solutions for the residential housing market and industrial sites. The fund managed to acquire an equity position in the company from Queensland Investment Corporation at a $22 million valuation, and just recently this year – Red Earth, who sponsored The Block, raised $7 million via convertible note at a valuation cap of $95 million.

Another example of LSAF’s encouraging performance is Skykraft, an Australian space services company that specialises in the design, manufacture and operation of satellite constellations. The company’s 200+ satellite network is for their proprietary Air Traffic Management services and operations, which is the only service that can provide seamless global communications to aircraft, delivering real-time communication between air traffic controllers and pilots – increasing safety in the air, enhancing efficiency and reducing carbon emissions. LSAF entered at a valuation just over $10 million, and Skykraft recently raised at a valuation north of five times that.

Australia has a massive waste problem that stems from coal fired power stations, as coal ash makes up almost 20% of the total waste in the country. It’s dumped in landfills and dams, while only around 20% of it is being reused in NSW – compared to the global average of 53%. LSAF found Nu-Rock, a company that invented a proprietary recycling technology that is able to convert coal ash into construction bricks and materials, and invested in them at a $40 million valuation. Nu-Rock is working with AGL and Energy Australia, and is about to go live at a power station in NSW. The interesting part – even when coal fired power disappears, there’s still a 100 years worth of stockpiles to churn through. 

LSAF also took a position in Site Group International Ltd (ASX: SIT), a critical training services provider whose business grew at a 63.84% compound annual growth rate (CAGR) for nine years to record almost $31 million revenue in FY19. LSAF entered after the company was crushed by covid, but they are now forecasting revenue of over $30 million in 2025. The company has garnered investment from prominent and institutional investors, such as EGP Capital, Lucerne Investment Partners, and Altor Capital’s Alpha Fund, for Site’s 38.4% interest in a 30 hectare leasehold in Clark, the Philippines.

Join Anthony Murphy this Friday, 21st of July at 12pm (AEST) on our The Insider: Meet the Fund Manager webcast to hear about his favourite companies, investment strategy, market insights and more. There will also be an opportunity to ask questions during the session. To book yourself in, click here.

Reach Corporate provides Corporate Advisory Services to Site Group International Limited and may receive fees for its services.

Past performance is not a reliable indicator of future performance.