Comfortable with being contrarian

Star Manager 2023
Marcus Ryan, Deputy Portfolio Manager, Yarra Australian Equities Fund
Yarra Capital Management

This year’s Star Managers recognition for Marcus Ryan, Deputy Portfolio Manager, and the wider Yarra Capital Management team dedicated to its Yarra Australian Equities Fund has rewarded their commitment to “contrasting our views to consensus”.

Boasting a genuinely long-term, bottom-up and balanced yet opportunistic investment approach, curated by a 13-strong research team and a fixed income team of 12 hosting over 2,500 meetings with management boards and industry experts each year, it comes as no surprise that the consistent process “almost encourages the outcome of being comfortable with contrarian positions”.

“We are looking for an edge that, by definition, is not well understood by others and that’s what brings this to life,” Ryan told Financial Newswire.

“Speaking to industry experts and economists, the mix of perspectives and experiences would lead us down a different route than other possible managers would go. Through the in-depth company meetings and the broad and experienced investment team comes the idea generation, and we’ve incorporated testing those ideas against a consensus view into the process.

“When we look at the broad-cap portfolio today, indeed we see that contrarian-ness because we do not own positions in some of the much-loved names like Wesfarmers, Woolworths and Coles. We are significantly underweight in CSL. If we look at our top 10 positions, we own stocks that are more on the contrarian side including Reliance and Origin Energy.”

Having 17 years in the funds management space under his belt and having stuck with Yarra Capital Management for seven years since its inception, Ryan emphasised the fund’s capacity to generate consistent returns across different market cycles through its divergent approach to investing.

“We are positioning the portfolio today in a selective way to outperform in the environment we think is to come,” he said.

“It feels like we’re in an environment right now where there is a lot of crowding in perceived safety. Thinking about the big blue-chip names like the supermarkets, Wesfarmers and CSL, the vulnerability in that crowding comes when a small amount of disappointment causes quite some movement.

“We are underweight in the top 20 names and we are seeing more opportunity in the names outside of the ASX 20.”

Ryan ascribed his personal successes in funds management to a drive for ambition nurtured from a young age, drawing inspiration from his adolescent experiences and embedding them into life as deputy portfolio manager.

“I always had a passion for business entrepreneurialism, new ideas and constant improvement. Prior to getting a proper job, I started a strawberry business at home. I bought and built the infrastructure, the runners and the equipment,” he said.

“Through that experience, I went from selling punnets by the roadside for one dollar to finding a sole purchaser of all my production who would supply restaurants in Melbourne. As we reflect on the portfolio and companies we own today, that powerful lesson of distribution is so important.”

Speaking on the Star Managers recognition, Ryan said it was “a great encouragement” but three-fold: for the equity business, the broad-cap equity strategy and the portfolio management team as a whole. He also applied this approach to charting the key qualities of a successful portfolio manager: quantitative, qualitative and inquisitive.

“In all the work we do, we must sensibly put those ideas into diverse balanced portfolios that will outperform,” he said.

“We are a fundamental bottom-up manager, and we are interacting with management teams all the time. Part of our job is to be able to back management teams we think are successful. That’s both the challenge and opportunity.

“Finally, a desire to learn and to be part of the stories and companies that grow over time is just exciting.”

Celebrate the achievements of the 2023 Star Managers and broader Fund Manager of the Year awards finalists with us at our gala dinner on Thursday 14 September from 6pm at the Four Seasons Hotel, Sydney. Tickets are on sale now and you can find more information about the awards and event here.