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Carrara Investment Management (ASX:CLF): Delivering cashflow

Featured Image-Carrara-Investment-Management-CEO-David-Sokulsky- The-Australian-Business-Executive

A newly-formed investment management business, Carrara Investment Management manages Australian equities via the company Concentrated Leaders Fund, with plans to build a broader business in global equities, trading and credit over the coming years.

The Concentrated Leaders Fund is a Listed Investment Company (LIC) trading on the ASX (ASX:CLF). The LIC is managed by Carrara Investment Management and has a focus on investing in S&P/ASX 200 listed companies. David Sokulsky is both Chief Executive Officer and Chief Investment Officer of Carrara, and previously ran the Concentrated Leaders Fund. Before that he held the title of Chief Investment Officer at Crestone Wealth Management, one of Australia’s premier wealth managers for high and ultra-high net worth clients. Mr Sokulsky spoke with The Australian Business Executive recently to discuss Carrara’s flexible approach to fund management, its plans to build into a global investment management business, and how technology has allowed better global access, enhanced transparency and better information flow for investors.

Understanding how markets behave

“Carrara is a fund manager,” Mr Sokulsky says. “We manage assets on behalf of our clients. Our clients at the moment are predominantly the Concentrated Leaders Fund. We manage those assets via an Australian equities mandate, and over time we want to grow our business to manage Australian equities, global equities, and also alternative investments.” 

With central banks lowering global interest rates significantly in the modern climate, it has become difficult for companies to earn the kind of cashflow that has previously been earned through stock dividends, term deposits or government bonds.

“What we aim to do is deliver to our clients a yield which is above that which they can get in those instruments, and also to outperform the market. What we’re trying to do is deliver cashflow, and deliver that cashflow with a consistency that people can rely on.”

The success of traditional equity fund managers is often determined by the style in which they manage money, with many claiming a growth bias, or that they are specifically managing for yield. Carrara looks to take a different approach.

“We’re pretty agnostic to style in terms of the way we manage money. We want to deliver that yield, but we also want to outperform. We recognise that there is a time that value styles outperform, and there’s a time when growth styles outperform. We don’t want to be put into a box that almost guarantees underperformance if a specific investment style underperforms.”

This indifference to style and the kind of equities it buys is a major difference between Carrara and other investment managers. This flexibility whilst searching for yield is a key USP of the company.

“When people invest with a fund manager, they’re really looking for return on their capital, and that’s what we’re trying to give them. What we’re trying to give is more of a holistic return than most people are focused on.”

Markets can swing and become volatile, driven by macro factors such as the actions of the central bank, interest rates, currency movements and so on. Carrara looks to marry a bottom-up stock-picker perspective, with a top-down macro perspective.

“We can try and navigate a lot of those market environments that are adverse to equity investors. We’re not style-driven, we’re not purely bottom-up, we’re not purely top-down. We think we can marry all of that together to deliver clients and investors a very attractive return, which can be sustainable over several different market and economic environments.”

Carrara is owned and run by Mr Sokulsky and his executive team. The LIC it manages, the Concentrated Leaders Fund, has been in existence since the mid-1980s, with an experienced Board including the company’s founder, Brian Sherman, as Chairman and the largest shareholder, a man with a wealth of experience in fund management.

“In addition to Brian, there are two other Directors [and] myself. Those other two Directors have close to thirty years’ experience as commercial lawyers. It’s very important to have Board members and Directors and a Chairman who are experienced in managing investments and companies through a variety of economic environments.”

With the recent COVID-19 experience, there has been a period where market volatility has been excessive. It is during times like these when experience needs to come through to help ensure people’s money is being managed properly.

“That experience – having seen the ’87 crash, having seen the Asian [financial] crisis, having seen the GFC and now the COVID crisis – has allowed them to understand the way markets behave, not panicking through that environment, and also giving me and the team confidence that they’re standing behind us.”

The guidance from a Board with this kind of experience can be invaluable, especially in terms of providing additional information that wouldn’t otherwise be available about how to react and whether the right decisions are being made.

“Our business is still a relatively small business, so our goals are really to grow that. By growing an asset management business, it’s really about bringing on additional clients and investors to increase the asset base.”

By increasing the asset base, the company is able to put in place the resources needed to manage the portfolio well, effectively reducing the cost of the business relative to its assets. Immediate plans are to raise capital in the Concentrated Leaders Fund, and also to develop a unit trust version of the fund for investors that prefer investing in unlisted vehicles.

“The very near-term goal is to increase that asset base in the Australia equities vertical of our business,” Mr Sokulsky says, “and then we can look at growing that asset base across other asset classes as well.”

Long-term, the firm is looking to build out a range of global products to offer Australian investors best-of-breed investment products under one umbrella, which will allow for first class risk management, infrastructure and culture.

During his extensive CV of professional work, Mr Sokulsky has taken a few important lessons from his experience, having seen enough of the funds management industry to recognise the key ingredients for success.

“My experience has taught me two very valuable things: that experience is crucial, particularly during turbulent times, and that risk management is crucial to an enduring business and delivering returns for clients over a significant period of time.”

Many people tend to misunderstand funds management, and what is needed to be successful in the industry. Often they are looking for a star stock-picker, or they think they’ve found a genius who can manage money better than anyone else. 

“I tend to disagree with that,” he says, “and I think a lot of funds management comes down to understanding that things do repeat, and if you’ve seen an experience through multiple cycles, that’s certainly an advantage. I was in New York during the Global Financial Crisis, and that was certainly an experience I won’t forget.”

The second most important aspect to think about is risk management, which is probably the most misunderstood part of the industry. A lot of people assume that if someone has earned an attractive end return, that makes them a good fund manager.

“In very simple terms, that’s incorrect, because that can vary over time periods. What you really need to be cognisant of is what risk you are taking, and whether you’re being rewarded for that risk.”

Mr Sokulsky believes there is a great opportunity to be had in the Australian funds management space. Managers in countries such as Australia have suffered in the past from a lack of access to global information, but with the advent of new technologies, managing money has become easier in terms of the informational flow than ever before. 

“The tools we’ve got available to us to manage risk have also been enhanced, so technology has done a great thing for the funds management business. I think that access to information and risk management should be two things that people focus on and really look at their managers in terms of how they’re using that.”

With a strong LIC through which it secures investments, and a flexible fund management style, Carrara is in a strong position to grow into global markets. Find out more about Carrara Investment Management by visiting


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