News & Events

Hedge Fund Interview with Stephen Ellis, Investment Manager, Agamemnon Equity Trading Fund of Tolhurst Ltd

The Agamemnon1 Equity Trading Fund was established by Stephen Ellis in November 2007. The initial methodology was developed over a 3-year period. Tolhurst Ltd is a publicly listed financial services group that recently celebrated 150 years of serving the investment needs of Australians. The benchmark for performance for the investment manager was established whilst working on a trading desk at Salomon Brothers Inc, London, in the mid-1990s.

In the five months since inception, the fund has outpaced the S&P/ASX200 Accumulation Index by 29.24% (15.59% positive gain) whilst utilising no more than 55% of available capital. The fund is not currently employing any leverage, though the mandate allows it.




S&P/ASX200 Accum

Jan 2008



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Apr 2008




  1. How, according to you, is your fund different from other Australian bottom-up investing funds, in terms of investment philosophy and strategy?

    In terms of strategy it might be hard to identify meaningful differences, though in regards to philosophy there are clear contrasts. In researching my peers, there is a belief that they can identify between 20 and 70 (10-35% of index) stocks that are worth acquiring. I would disagree with this thesis. Capital perseveration is a core element of my philosophy; many funds have a minimum that must remain invested in the market. Our fund allows us to move to a 100% cash position if necessary. Furthermore, the fund has an ambitious target return of 20% pa pre-tax.

  2. Many managers have made some decent gains (or at least offset a good portion of their losses) from shorting equities in their respective regions, over recent months. Could you tell us your rationale behind launching a long-only fund?

    The fund idea originated out of an important client who did not want to be disturbed whilst he was out on his property pulling out fireweed. He wanted what was essentially a disciplined, defined discretionary account. We see this as a growing market. The mechanics of the fund allow investors anywhere to monitor fund performance (and measure against various indices) from a website, daily if they wish. Investors want increased transparency.

    Subsequently, there has been interest in a developing a long/short fund, utilising some leverage. Asia could be an interesting destination to develop this.

  3. Could you tell us a little about the kind of qualitative and quantitative research that you perform prior to actually investing into stocks?

    Incisive qualitative research is difficult to find. One element is to identify sustainable competitive advantages of a company. In terms of quantitative material, I source research from a number of parties. Our in-house research department produces various reports that are of specific use.

  4. To what extent and on what basis do you diversify your fund's investments across the different sectors in the region? Which of the sectors are you currently bullish on?

    The focus of the fund is the Australian equity market. Diversification across sectors is not a core element of the investment process. There must be compelling reasons to buy a stock in the first instance; there is no bias towards a particular sector. The energy and financial sectors have proved profitable recently. I am learning to remain more neutral, my "bullishness'' in January and March cost the fund performance.

  5. Your investment strategy states that you aim to include no more than three securities, out of a single GICS sector, in your portfolio. Could you explain the rationale behind this restriction?

    It is there to temper any potential enthusiasm for an over concentration in one sector.

  6. What is the usual holding period for the fund's investments?

    The current holding period is of a much shorter duration than what would be normal for a trending market. With sharp price reversals occurring after good gains. a couple of positions have been held as short as three days.

  7. Your fund has outperformed the Eurekahedge Australia/New Zealand Hedge Fund Index by an impressive 15% since its inception, in November 2007. What would you attribute this distinctive performance to?

    The overall methodology has proved itself sound, except where I had intervened in the process. The good news is that the refinement of the methodology is ongoing. One has to be adaptive.

  8. The recent market turbulence and the severe credit crunch have taken a toll on many equity-focused funds across the board. Can you elaborate on the risk management practices that you have in place to protect the investments of your fund?

    Risk management to me is a 24-hour process of asking myself "Have I got this trade wrong?" Should a position move against me, we will either cut it or buy more.

    Managing risk is a mindset, not a system in my view and ultimately, it comes down to a core element, that of capital preservation.

  9. What types of investors is your fund targeted towards? And what are the types of investors that have shown interest in your fund, since its inception?

    The fund was initially designed for high net worth individuals. It has been a pleasant surprise to have had approaches from several institutions. The fund is still in its infancy and I am more than happy to engage both individuals and institutions on securing potential mandates. Those who are supporting us at this stage will be offered first tilt at any subsequent fund launch.

  10. And lastly, could you share with us your near-term outlook of the Australian markets?

    From a quantitative perspective, slowing earning's growth will certainly impact some sectors and the May to October period is traditionally not the most lucrative. From a market one, my role is to attempt to keep pace with the alpha lions that can charge the herd at any time.

Contact Details
Stephen Ellis
Tolhurst Limited
+61 2 9258 8970


1 Meaning "very resolute".