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March 21, 2023

In conversation with… Daniel Dickens

Daniel Dickens has been Cromwell’s Chief Technology Officer for more than seven years, but has had an association with our business for more than two decades.

Daniel relies on his extensive experience to help the company navigate the fast-paced world of information technology and understand the risks, challenges, and opportunities that come with operating in a hyper inter-connected world.

Daniel Dickens Chief Technology Officer Information Technology


1. Can you walk us through your role at Cromwell, Daniel? What are some of the key responsibilities you take on daily?

I’m the Chief Technology Officer and, though I’m based here in Australia, the remit is across the European and Singapore platforms as well. I am largely responsible for building and implementing our technology capability and IT roadmap, as well as looking at governance to support our current and future infrastructure.

Cybersecurity obviously is a large part of my role – I’d suggest that as much as 25% of my time is spent on cybersecurity initiatives, presentations, and considerations. Of course, many of our governance frameworks that relate to selecting, evaluating, or protecting technology links back to cybersecurity anyway.

It’s a very risk-based approach – we have risks that are managed at a corporate level, but we also need to embed risk assessments into every platform that we consider for implementation – as well as for all the change initiatives we undertake.

So, if there is an upgrade, or if there is some functional change that we are making to our environment, we need to consider all the risks involved.


2. Looking back, how did your career in information technology begin?

My father had an IT consulting company, so I was always around computers as a kid. I played a lot of computer games, and I went into a technology degree following school.

After pursing another passion for a short while, I then came back to the industry working with customer relationship management systems (CRM) systems, and spent a lot of time working with manufacturing systems and in investor relations systems.

My first engagement with Cromwell was nearly 20 years ago, and I was designing and implementing an investor management system with Richard Foster, one of Cromwell’s founders. Richard and I would build these big A3 investor reports using a platform called Goldmine – which was Cromwell’s first investor relations platform.

I think I certainly have an aptitude for work in IT – I’m very good at putting things in boxes; I have a lot of skills in developing methodology and proceduralising tasks, and I have a strong technical background, which has been helpful.


3. How does technology factor into the decision-making processes at Cromwell?

Cromwell sets out an annual business strategy – and we, as a technology function, look at the strategy and how it aligns with our roadmap. For instance, if the business wants to increase funds under management, we review our current platforms and capability to examine what we can do to support that goal.

So, when we look at technology factoring into decision-making processes, data obviously plays a large role in everything that we do. Much of the data we hold is stored on platforms that the technology department is largely responsible for – in conjunction with marketing or finance (for example) or whichever team owns the information. We help oversee the security of that information, and the consistency of that information, and help business stakeholders implement governance to manage the information effectively.

A lot of the decisions that we undertake from a business perspective are around streamlining, including questions like, “can we utilise technology to generate efficiencies in the business?” And, you know, a good percentage of the effort that we apply is in trying to identify, and then achieve those efficiencies – and we often succeed.


4. There have been some very public privacy/data breaches in some very large organisations recently, how does Cromwell manage risk and protect our business – and our investors? How do we minimise the chance of these kinds of hacks happening to us at present?

So, I guess the first question that comes up is, “what is the sensitivity of the information that we’re protecting?”. The most sensitive data we hold is information relating to our investors, so it’s essential we have robust protections in place.

When we look at things from a cybersecurity perspective, we’re looking at four key risk areas: integrity, accessibility, unauthorised access, and unauthorised disclosure. We look at the integrity of the information to make sure that it’s not corrupted, that it’s regularly backed up, and ensuring we have enough controls to protect against deliberate or accidental actions that may compromise files or important data.

We also need to look at accessibility of data– that is, “how can we ensure staff and stakeholders can access the information they need, when they need it?” So, we have systems and interfaces that are dependent on the latest cloud technologies to ensure our staff can securely access the data they need to run the business.

We also ensure that none of the data resides in a specific single location (such as a building’s server room) – we always have data distributed geographically to ensure we can maintain access in the unlikely event of business interruption.

Just as important as accessibility, is our need protect our data from unauthorised access. The two highest profile attacks from last year (Optus and Medibank) both resulted in unauthorised access of information, followed by unauthorised disclosure of that same data. Clearly, these breaches caused significant damage to both company reputation, as well as inconvenience and risk within people’s lives. Cromwell maintains a robust landscape of measures to ensure that the only people who access our data, are those authorised to do so. These measures include tools to confirm a users’ identity (such as multi-factor authentication) as well as tools and procedures to confirm suitable access levels.

We also have a very highly regulated information security management system, ISMS.

This is the basis of our ISO 27001 certification. Every year for the past four years, we have gone through ISO 27001 certification – where an independent auditor reviews and tests our information security management system. They also make recommendations as to where improvements can be made. We have a second external organisation to help us prepare for these audits, so that we can pre-empt issues that may occur. So, we have both internal and external audit functions in that space.

In the unlikely event we experience some kind of breach, we have a cybersecurity incident response plan that is tested every year. These tests involve a wide array of stakeholders from across the business, to ensure we are all aligned to respond to any kind of cyber breach or attack. While we believe our cyber-response capabilities are strong, we are always looking for ways to enhance the way we work, and these tests often highlight opportunities for improvement. We also have a range of vendors that we engage to support us in the unlikely event of a cyber incident.

I think in 10 years we’ll all have VR headsets to speak on team calls. We’ll be sitting on a laptop, but it’ll probably be more like a virtual reality-based exercise.
Daniel Dickens – Chief Technology Officer, Information Technology

5. What are some changes or shifting attitudes/trends/practices that you currently see playing out in the corporate IT space, particularly around cybersecurity?

I think there’s been a lot of activity in the proptech space. Proptech is the application of technology to help optimise the way people buy, sell, research, market, experience, and manage real estate. At Cromwell, we have a proptech working group that involves participants from both Europe and Australia. My primary interest is focused on governance of our proptech initiatives.

For example, let’s imagine we decide to implement a theoretical occupant management system – a system (with associated mobile app) to allow building occupants to order coffee or lunch to their desk; get their dry cleaning picked up and delivered; turn the building lights on and off; or possibly report safety incidents, etc.

Before beginning such an implementation, we’d need to make sure that we understand the requirements and resources necessary to make the implementation successful.

In the event we start deploying the system and realise we have underestimated the resources required to be successful, the damage could be profound – and could severely impact any future technology activation. So, part of our governance is to ensure we fully understand what that implementation looks like before we take the first steps. Sometimes it can just be a matter of managing people’s expectations and enthusiasm.


6. What opportunities in the IT space excite you, and how do you think Cromwell’s use of technology overall could be developed moving forward?

There seems to be a shift towards presence-based interactions and immersive VR experiences. This is the progression of technology so that, rather than just sitting on a video call and looking at a laptop screen, attendees of a meeting from across the world can all experience sitting in an interactive, immersive virtual reality office space. We know big tech vendors such as Microsoft and Meta are spending huge amounts of money on research and development in this area. While, at the moment, these investments have largely been realised in the gaming market, it’s only a matter of time before these developments start driving mainstream change in the way we work as well.

In my view, I think in 10 years we’ll all have VR headsets to join Microsoft Teams (or Zoom) calls. While we’ll still be using a laptop for documents and information systems, our meeting experiences will be more like a virtual reality-based exercise. We’ll be able join meetings in virtual rooms; we’ll be able to draw on whiteboards; we’ll be able to sit and turn and talk to each other. I think this will be a big improvement in driving the productivity of virtual meetings and, with the current trends in remote working, this technology will improve the productivity of many teams as a whole. It’s a really exciting time!

So, my expectation is that we’ll probably start going down that pathway. Right now, Microsoft’s not quite there, but the licenses that we are buying, and our roadmap, allows us to leverage these developments when the technology is ready.


7. What do you enjoy most about your role?

I like that I’m genuinely able to make a difference. When we sit down as a team to look at a problem, we know that we’ll be able to solve that problem and drive an initiative through to achieving a positive outcome for the business.

My background is in consulting, so I’ve always been able to go and make a difference in businesses. However, in consulting, you find that you just go from organisation to organisation to organisation, making a difference in the same space over and over – you are rarely able to build upon your past accomplishments. At Cromwell, this is an ongoing journey and we’re continually able to leverage the team’s past achievements to improve the future of the business.

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February 16, 2023

A parma, a pint, and a profit

Stuart Cartledge


There is much written about office, industrial, and retail property; however, the proliferation of specialised real estate investment trusts (REITs) is also increasingly becoming a noticeable factor in local and global markets. Historically, these trusts were viewed sceptically, though there is now a growing recognition of the strong fundamentals of many specialised property types.

A specialised property category that has traditionally been lucrative for Phoenix Portfolios is pub properties. Australians love going to the pub, and it is estimated that there are approximately 9,500 licensed venues across the nation, representing a market size of more than $15 billion.

Pubs are an often-misunderstood, niche investment. The properties have often been housed in unique structures with unusual dynamics, but provide interesting investment opportunities for those willing to take the time to understand their intricacies. In many cases, pubs are some of the safest investments, with extremely secure income streams.


Real old school

In the mid-1800s, John and James Toohey (yes, the founders of their eponymous beer) took control of a site – previously a schoolhouse – on the corner of Flinders and Swanston Street in East Melbourne and opened the Princes Bridge Hotel. Irish diggers and cousins Henry Young and Thomas Jackson later took over the pub, and unimaginatively renamed it Young and Jackson. People from all walks of life have been socialising, eating, and drinking in this building for more than 150 years. Despite all the changes to technology, communication, transportation and so much more, the Young and Jackson pub of today would be eminently recognisable to those who patronised it in the 1800s.


A refreshing ALE

The Cromwell Phoenix Property Securities Fund (PSF) previously had a stake in ALE Property Group (previously traded on the ASX under code LEP), which had ownership of the Young and Jackson.

Indeed, LEP owned more than 80 pub properties previously leased to ALH Hotels, which was majority owned by Woolworths (WOW) ¬- now mostly owned by Endeavour Group Limited (EDV) after a spinout transaction completed in June 2021. EDV is the owner of ALH Hotels, along with BWS and Dan Murphy’s, and has a market capitalisation of approximately $11.5 billion.

LEP made history when it was spun off from Fosters Group in 2003. It became Australia’s first pub rental securitisation and the nation’s first listed pub trust. One of the unique characteristics of the LEP portfolio was the presence of an uncapped market rent review for the properties in 2028. Due to the outperformance of the ALH operating business and long-term nature of the leases, the portfolio was rented significantly below market levels. In 2021, LEP suggested under renting was 35.6% ¬- a figure which may have understated the true amount. LEP had also been curating their portfolio of assets, selling those that happen to be over rented at significant premiums to book values.

Due to the nature of the portfolio, Phoenix considered its cash flows to be amongst some of the lowest risk in the sector, with significant upside over the longer term, due to its significant under renting and the goodwill value of the operating businesses.

That proved to be the view of at least one other market participant, with funds managed by Charter Hall Group (CHC), including Charter Hall Long WALE REIT (CLW), announcing a proposal to acquire LEP in September 2021. The proposal included consideration in the form of both cash and CLW securities and represented a 25.2% premium to the prior day’s closing price. The proposal was approved by securityholders and Phoenix successfully exited its investment in LEP.


A Hero in a red cape: Redcape

Redcape Hotel Group (previously traded on the ASX under code RDC) was another pub owner in which PSF invested. Another unique structure, RDC traded at what is known as an OpCo/PropCo, whereby RDC was the owner of both the pub operating entity (OpCo) and the entity which owns the pub property (PropCo).

RDC was externally managed by MA Financial Group and begun life as an unlisted fund, which subsequently listed on the Australian Stock Exchange, with a mandate to grow quickly by acquiring more pubs.

RDC traded at a consistent discount to its director’s net asset value (NAV), frustrating its external manager. To combat this, in August 2021, RDC announced a somewhat complex transaction in which RDC shareholders could chose to redeem their investment for $1.15 per share, or remain invested in an unlisted fund with quarterly liquidity windows, presenting an opportunity to redeem at a pre-set (and reducing) discount to director’s NAV. As an indication, RDC traded at less than $1.00 per share prior to the transaction’s announcement, compared to the director’s NAV of $1.31 per share.

Phoenix Portfolios believed that at the time of the announcement the NAV was conservative and redeeming RDC units with reference to a future NAV represented an attractive investment opportunity. Furthermore, given the operating business and commitment to pay out earnings quarterly, there would be a strong running yield generated by holding the unlisted investment. A position was established.

The actual results surpassed expectations. Phoenix redeemed its investment on 30 June 2022 at a unit price of $1.5277. After becoming an unlisted fund in November 2021, the portfolio also received 6.55 cents in distributions from RDC. The portfolio’s cost base for RDC was approximately $1.12 per unit, meaning the investment returned a total of a just over 42% during its short holding period, representing an internal rate of return (IRR) of 61%. During this period, the S&P/ASX 300 Accumulation Index returned -15.8%. This was truly a fantastic outcome for investors.

Phoenix redeemed its investment on 30 June 2022 at a unit price of $1.5277.

How about today?

PSF has two current holdings with pub exposure – the small Queensland-based Eumundi Group Limited (EBG) is a long-term holding, with a strong management proposition, that we remain comfortable with.

The other holding is Hotel Property Investments (HPI), which was a meaningful contributor to performance of PSF in the December quarter. HPI owns 62 pub properties, predominantly leased to Australian Venue Co (AVC), which is owned by private equity firm KKR.

AVC traces its origins to Coles’ past ownership. HPI’s large exposure to Queensland is no mistake. Under Queensland law, to apply for a detached bottle shop license, the licensee must operate a “commercial hotel” (in common language, a pub), within 10 kilometres of the proposed bottle shop. As Coles desired to operate bottle shops in Queensland it also needed to be a pub operator, hence its ownership of AVC. Under a complex transaction, KKR took ownership of AVC in a manner which allowed Coles to continue operating its bottle shops. Under KKR’s ownership, AVC has grown rapidly and produced fantastic financial results.

At the start of the quarter, HPI traded at $2.93 per share, or a 30% discount to its net tangible asset value. HPI has also periodically engaged small scale sales of some properties at premiums to book value. In late November and early December, entities associated with Tony Pitt’s 360 Capital Group purchased a 13.81% stake in HPI at prices as high as $3.67 per share. Those familiar with Tony Pitt’s history know that corporate activity in some way is likely to follow. HPI was the second-best performing security in the REIT index over the quarter (only behind URW) rising 24.6%, closing at $3.56 per share. How any potential corporate activity will play out remains to be seen.


Finding a Niche

For many, not much time is devoted to specialised, niche investments. Phoenix, however, often finds that some of its best ideas are found by looking at smaller, more complicated opportunities.

If others are unwilling to look into these unique situations, the reward can often be better for those committed to put the time and effort in to find potentially misunderstood opportunities.

Clearly over time, the pub sector has represented one such opportunity and in recent times has provided some very good outcomes for investors. This is representative of only a part of the unique opportunities that are looked at. With more uncertainty than ever in “core” property asset classes, being willing to look far and wide will hopefully be a continued advantage for those invested in this portfolio.


About Stuart Cartledge

Stuart is the Managing Director of Phoenix Portfolios and the portfolio manager for each of the company’s property portfolios. Prior to establishing the business in 2006, Stuart built a strong track record in the listed property security asset class and has been actively managing securities portfolios since 1993. Stuart holds a master’s degree in engineering and management from the University of Birmingham and is a Chartered Financial Analyst.

About Cromwell Phoenix Property Securities Fund

Read more about the Cromwell Phoenix Property Securities Fund, including where to locate the product disclosure statement (PDS) and target market determination (TMD). Investors should consider the PDS in deciding whether to acquire, or to continue to hold units in the Fund.

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December 10, 2022

Stock in focus: Retail Value Inc


The Cromwell Phoenix Global Opportunities Fund (GOF / Fund) searches for investments with unique qualities that are hard to discover, yet simple to value. Spinoffs provide a fertile hunting ground for these types of situations and Phoenix Portfolios uncovered one in Retail Value Inc (RVI).

A spinoff occurs when a larger business takes a subsidiary, or part(s) of its existing business, separates it into a new, independent company and in most cases distributes shares in the newly separated entity to existing shareholders, whether they like it or not.

Thankfully for us, many existing shareholders do not like it, as the spun company is commonly a lot smaller and/or ‘non-core’ to the broader business. At times this can create strong selling pressure and a wonderful opportunity to purchase the spun off security at a large discount. RVI is an example of an investment that Phoenix naturally gravitates to.

In July 2018, RVI spun out from long-time US-listed shopping centre owner, Developers Diversified Realty (DDR) (more seasoned investors may have some painful memories and financial scars from the formerly Australian-listed Macquarie DDR Trust).

At inception RVI was to own 50 shopping centres, comprised of 38 in the continental United States and 12 in Puerto Rico. RVI was to be externally managed by DDR and had an explicit mandate of selling those assets over 36 months and distributing the proceeds to shareholders.

The assets placed into RVI were described as ‘stable but lower growth’ in the registration document associated with the spinoff. Furthermore, the Puerto Rican assets were said to ‘present uncertain future cash flows because of macroeconomic factors’.

Translating this from ‘business speak’ to plain English, DDR was handpicking its 50 worst assets and selling them because it no longer wanted them.

Readers may be wondering who in their right mind would want handpicked ‘bad’ shopping centre assets. This would be an astute observation and it seems DDR shareholders didn’t want that exposure either. Six months after initially trading at more than $36 per share, RVI’s share price was approximately $25.50 per share (dropping ~30%).

Despite the poor share price performance, RVI was achieving solid asset sale prices, significantly ahead of what was implied by the share price and appeared to be executing on their stated strategy admirably. While this looked like an attractive opportunity, this occurred approximately 12 months before the initiation of the GOF. In that 12-month period, RVI continued to deliver on its stated goal of selling assets in a methodical manner, achieving robust sales prices.

Investors started to believe that despite the flaws, the company may present a compelling investment opportunity. As such, the stock price rallied to approximately $39 per share. By the inception date of the Fund, it no longer presented a compelling investment opportunity and as such it was not held. Despite this, it was not forgotten.

Phoenix continued to track RVI’s progress as it continued to sell properties. The period beginning March 2020 presented a tumultuous time, with uncertainty around the ability to collect rent and sell assets as COVID-19 and associated restrictions spread around the world. A restoration of relative normality and more conducive financial markets allowed asset sales to restart in 2021. To July 2021, the vast majority of the assets sold were located in the Continental US. The initial 38 mainland assets were whittled down to only eight, whilst nine of the initial 12 Puerto Rican assets remained.

The Fund aims to invest in areas within the team’s circle of competence. Mainland US retail assets very clearly fit into this, however with the majority of assets in Puerto Rico and limited knowledge of that market, the variance of possible outcomes was too wide to accurately assess.


Who would even bid on a large-scale portfolio of Puerto Rican shopping centres?

The answer was Kildare Partners, a real estate private equity fund run by Ellis Short (some may remember Short as the former owner of English football team Sunderland AFC, also a key character in Netflix documentary Sunderland ‘Til I Die). The $550 million headline price was a very solid outcome, however, there was set to be more than a month between the announcement and cash payment. With such a substantial transaction in a developing jurisdiction, the risk of not closing on the deal seemed high.

In August, it was announced the full cash proceeds had been received. The stock price was unmoved on the announcement and RVI was being valued at a discount to Phoenix’s assessment of the value of what was left. Eight US shopping centres and a big ‘pile’ of cash. As such, we finally initiated a position in RVI.

Investors didn’t have to wait long for further activity. In October 2021, the company announced the sale of five further assets. Phoenix first paid $24.30 per share to acquire a stake in RVI. Two months later, RVI announced a $22.04 special dividend to shareholders, meaning more than 90% of our initial investment was to be returned, along with a holding in the remaining three assets and a smaller but still meaningful ‘pile’ of cash. After the dividend was paid, what was left of RVI traded at a value that was once again attractive to Phoenix and, as such, more RVI shares were purchased at a price of $6.00. Again, it was a short wait for further positive outcomes, with two of the remaining three assets sold and a further $3.27 dividend announced in December 2021.

In March 2022, RVI announced the sale of the final asset and a plan to delist the company from the New York Stock Exchange. With this sale, the only meaningful asset of RVI was (you guessed it) a pile of cash. This amounted to approximately $3.90 of cash (and receivables) per share.

Table 1: RVI share purchases

The last day of trading for RVI stock was to be 6 April 2022. Some investors cannot own delisted securities and are therefore required to sell before delisting occurs. Ready for this, the Fund amassed some cash to get ready for a potential attractive opportunity. The market was co-operative, offering RVI stock for $3.00 per share. With such an incredible risk / reward trade off, Phoenix made RVI a larger position in the Fund.

Six days later a $2.13 dividend was announced, returning more the 70% of the money invested prior to delisting. In June, a further $1.16 dividend was announced. This means that only three months after paying $3.00, RVI will have returned $3.29 to shareholders, with future additional distributions of the remaining $0.61 per share of cash (less wind-up costs) highly likely.

The Fund made three separate purchases of RVI shares. The likely financial outcome of each purchase is outlined in the table 1. From the table above it can be seen that the most attractive opportunity (and largest position taken by Phoenix), occurred when RVI had only cash left on its balance sheet. Due to timing and US GAAP accounting quirks, investors had to be following the RVI situation to discover this opportunity.

When describing the strategy of the Fund, we often discuss the metaphor of buying a dollar of assets for 50 cents, with the goal of getting one dollar (or more) back at an uncertain future date. In this case, a dollar of cash was literally purchased for less than 75 cents, with the very high expectation of receiving a dollar back within six months. RVI has resulted in a strong outcome for investors, and we continue to hunt for more opportunities like it.

Cromwell Phoenix Global Opportunities Fund

Read more about the Cromwell Phoenix Global Opportunities Fund (Fund), including where to locate the product disclosure statement (PDS) and target market determination (TMD). Investors should consider the PDS in deciding whether to acquire, or to continue to hold units in the Fund.

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December 7, 2022

Stock in focus: Korean preferred securities

Stuart Cartledge


The Cromwell Phoenix Global Opportunities Fund (GOF / Fund) searches for investments that are distinctly cheap and simple to value, yet hard to discover.

Owing to the unique nature of its economy, one such example can be found in South Korea (Korea). While not an individual stock, Korean preferred securities represent a class of stocks which appear to be one of the most attractive, underfollowed and inefficiently valued opportunities globally.

To many Australians, Korea may be famous for its barbeque and kimchi; however, it is also home to some of the world’s largest and most advanced companies. Korea is Asia’s fourth largest economy and is the 12th largest worldwide. Despite this, its share market is mathematically one of the cheapest in the world, with a price to earnings (P/E) ratio of only marginally above nine. This is despite the market being largely constituted of world-leading information technology companies.

Part of the explanation for the cheap valuations is the shareholding structure of many Korean companies. In Korea, many prominent companies – known as chaebol, or conglomerates – are controlled by an individual, powerful family. These chaebol have not always acted in the best interests of minority shareholders and, from time to time, have been embroiled in corrupt behaviour, or have abused close ties to the government. In recent times, chaebol have been incredibly politically unpopular in Korea, which led to comprehensive industry reform. Former president, Park Guen-hye, was recently impeached amid public pressure, in part due to her relationships with chaebol.

Several decades ago, the Korean government pressured chaebol to raise capital to de-lever their capital structure and protect Korean jobs; and, therefore, reduce any civil unrest. The problem for the powerful families was that a standard equity raise would dilute their company ownership and reduce their control. As a result, the owners created a new class of shares – preferred shares – which, unlike other preferred securities that are more fixed income-like in nature, have the exact same economic rights as regular equity, but do not have any voting rights. These shares were issued at slight discounts to regular securities and were mostly purchased by Korean retail shareholders.

Over time, the discount on the preferred securities has widened from small amounts to 30%-70% in many cases. Considering that many Korean equities trade at low valuations, the discounts provided on preferred securities are particularly attractive. Many institutions cannot effectively invest in Korean preferred securities due to their small free float and relative illiquidity.

Let’s take LG Electronics as an example. Yes, that’s the LG Electronics you know for making OLED TVs – previously marketed passionately in Australia by cricketer David Warner. LG is a globally recognised brand, which sells consumer electronics, home appliances, and home entertainment products. Based on broker estimates, LG’s ordinary share price implies a price to earnings ratio of somewhere between 5.5x and 7x – not a hefty price to pay for such a company. The company also has preferred shares on issue. As at 30 September 2022, LG preferred shares traded at a 53% discount to the ordinary shares. As a reminder, the only difference is the voting rights – the economics of the share classes are identical. Assuming LG’s ordinary shares trade at a P/E ratio of 7x (the conservative side of broker estimates), the preferred shares trade at an eye watering 3.3x P/E ratio. Unless you believe TVs (and other home appliances) are going the way of the dodo bird, this clearly presents a highly attractive investment opportunity.

Phoenix Portfolios chooses to access discounts like the one mentioned above for the Cromwell Phoenix Global Opportunities Fund through a basket of Korean preferred securities. Investing directly in Korean shares as a foreigner is a complex process, with challenges beyond the scope of this article. The Weiss Korea Opportunity Fund (AIM:WKOF) is listed in the United Kingdom, with an investment strategy of investing primarily in Korean preference shares trading at a discount to common shares of the same issuer. The fund has best-in-class corporate governance and a well-respected manager. The basket of preferred stocks owned by WKOF trade at an average discount of 53% to their common shares, and a trailing P/E ratio of 4.8x as of September 2022. Given all of the above, Phoenix has chosen to gain its exposure to Korean preferred securities through an investment in WKOF, although this may change in the future. WKOF is one of the largest holdings in the fund.

Since inception, WKOF has been a solid contributor to the Cromwell Phoenix Global Opportunities Fund’s returns. At current pricing, Korean preferred securities appear to be one of the most attractive, underfollowed, and inefficiently valued investment opportunities globally. While this alone does not guarantee success, we believe investing in these types of mispriced opportunities will assist in achieving strong returns over the long term.

Since inception, WKOF has been a solid contributor to the Cromwell Phoenix Global Opportunities Fund’s returns. At current pricing, Korean preferred securities appear to be one of the most attractive, underfollowed, and inefficiently valued investment opportunities globally. While this alone does not guarantee success, we believe investing in these types of mispriced opportunities will assist in achieving strong returns over the long term.

Cromwell Phoenix Global Opportunities Fund

Read more about the Cromwell Phoenix Global Opportunities Fund (Fund), including where to locate the product disclosure statement (PDS) and target market determination (TMD). Investors should consider the PDS in deciding whether to acquire, or to continue to hold units in the Fund.

Person typing on a laptop


December 6, 2022

Managing and mitigating risks with Cath Parker

Following a successful legal career, Cath Parker developed a passion for managing and mitigating risk on an organisational scale.

Cath joined Cromwell as our Head of Risk and Compliance in 2021, and she has overseen some rapid advancements at the Group in that time – particularly in the ESG space, where she has a real desire to make a difference. Cath loves a glass of bubbly, and her two dachshunds, and finds time to give back to the community in her spare time.

Cromwell Cath Parker Head of Risk and Compliance


1. Tell us about your role. What are some of the key responsibilities you take on daily?

I’ve been with Cromwell for 18 months – and stepped into a newly created role as Cromwell’s first Australian designated head of risk. I’m responsible for our enterprise-wide risk management and compliance functions, especially relating to our AFSL obligations. Essentially, this links to ensuring our investors have the right level of protection; ensuring that all our regulatory risks are managed; and that we’re compliant where we need to be.

It’s a broad remit – because risk is present in everything that a company or individual does. You can’t silo off risk to one side because, at the end of the day, we all manage risk – from choosing to cross a road; or whether we holiday overseas; or whether we choose to invest in certain products or with certain companies. When you strip it all down, managing risk is about making good decisions, and part of my role is to assist people to do that. Our frameworks and policies are designed to support informed decisions, so that the right information is included; the right people are part of the process; and that we do things in a timely way. Similarly, being able to see the impact of that decision is important, as is being able to quickly change tact, if needed.

I really enjoy my role, because it draws together a number of functional threads. This allows us to think about risk and compliance as more than just a ‘tick a box’ exercise. Embodying good risk management leads to better decision making; it includes always being ethical and focused on the right considerations, including ESG and risk factors in our actions. Above all, we want to make sure that our investors’ interests are protected – and that our products and services reflect that priority.


2. How do you make sure that risk management at Cromwell is a day-to-day process?

It’s a mix of a ‘top-down’ and ‘bottom-up’ approaches. It starts with our Boards thinking deeply and often about the key risks that lead us to unexpected outcomes, and how much and what type of risk they decide we should take, in executing the business strategy. On the other side, we also engage with our people and include a bottom-up aspect. Everyone in the business manages risk in their individual roles, so it’s important that we consider risks at every level.

Ultimately, making risk management come alive day-to-day requires exploring the psychology of risk – it’s a fascinating topic. Managing risk largely involves humans, who all think, behave, and react differently. Trying to understand the risks that you may not see, because you have a particular bias or different set of experiences, very much requires a psychological approach.
We invest in property – bricks and mortar – but it’s ultimately our people that make us strong, and it’s up to us to make sure they are supported in doing their best work because we all want great outcomes for our investors.

Managing risk is about making good decisions, and part of my role is to assist people to do that.
Cath Parker – Head of Risk and Compliance, Risk and Compliance

3. Looking back, how did your career in risk and compliance begin?

I took a job as the first in-house lawyer with a small financial institution in Brisbane many years ago.

I’m fortunate that my role there expanded rapidly. In addition to the legal and regulatory function, I was managing multi-disciplinary teams, including securities and mortgage production; adding company secretarial and governance functions; and our financial planning business was restructured and expanded, requiring a wider remit. At the time, the regulator, APRA, was implementing changes to ensure financial institutions prioritised risk management and required licensees to have a dedicated risk management function with direct reporting lines to boards.

Before that, I was an ‘escapee’ from about 15 years of private law practice. For me, it was often frustrating to provide legal advice in a private firm environment – as it can be difficult to get under the hood of a business; you may not understand why decisions are being made. Sometimes it feels like you’re looking in through the window, rather than being in the action. I’m an extrovert, so I enjoy engaging with people and I was always drawn as a lawyer to explore the context and inner workings of clients’ businesses to make sure any advice is practical well as being legally correct.

I enjoy being part of a business; being not only an advisor but also understanding and creating strategy and implementing it. Of course, being a lawyer, regulatory stuff is interesting for me, so that’s set me up well for my current role. I do genuinely love the work that I do.


4. There have been some very public privacy/data breaches in some very large organisations recently, how does Cromwell manage risk and protect our investors? How do we minimise the chance of these kinds of hacks happening to us?

It’s about making sure that we have the fundamentals right first, which includes having strong processes and mechanisms to make our systems sound. At Cromwell, we have a three ‘lines of accountability’ approach to ensure that everyone in the business manages risk, knows their role, and that there is checking and testing to give assurance, as well as to help us continually improve.

The first line of accountability are our teams performing their roles – from creating products and providing services, dealing with investors, managing IT or accounting functions – and managing the risks relating to their role. As a risk and compliance team, or in ‘line 2’ we provide expertise, support and consider how our people can have the right boundaries and steps in place to comply with laws and manage risks.

We also make sure the right framework is in place to enable the Board and management to oversee performance and know when there are concerns. To help us monitor risk levels, our team also performs independent tests and investigations and assist managing issues.

An extra layer is the third line. This involves Cromwell obtaining independent and objective assurance, mainly via external professionals such as auditors, consultants, or certifiers. As well as meeting regulatory audit requirements, we consider particular areas of risk – cybersecurity is a good example – that are so important that we obtain extra assurance from experts to do a review or deep dive to identify if and where we should make changes; to benchmark ourselves and continually improve. So, our three lines approach defines accountability and includes focus on aspiring to always enhance our business.


5. What are some changes or shifting attitudes/trends that you currently see playing out in the governance, risk, and compliance sector?

Change, and the speed at which it occurs are the standout factors.

We know that change is constant – there will be property cycles, interest rate rises, pandemics and other headwinds – but being able to trust in your people; give them the tools to perform their roles well; and have the right framework in place to navigate unpredictability all helps in responding confidently. By definition, managing risk is responding well to impacts – both positive and negative – on the achievement of goals, so uncertainty is inherent in that. You must be comfortable with navigating uncertainty, which can be difficult, and be prepared to adapt to suit.


6. How is Cromwell responding to the growing importance of ESG for both investors and tenants? Is it a case that ESG is now as important as all other business considerations, do you think – and how do you see businesses adapting to this changing stakeholder sentiment?

Cromwell has always prioritised ESG factors as part of its business and Cromwell’s previous work in sustainability was one of the reasons I was attracted to this role.

Including ESG factors in decision-making and business processes is part of managing risk well. It’s not really that ESG of itself is as important as all other business considerations, because ESG issues, being so wide and varied, are part of all of our decisions and activities.

It’s been exciting to be closely involved in reviewing Cromwell’s forward ESG pathway including refreshing our ESG Strategy. I’ve been so impressed that everyone at Cromwell – from the Board to our people – are actively engaged, enthusiastic, and committed to playing our part in responding to critical issues, including climate change and decarbonisation. I am proud that this enthusiasm has been matched with authenticity, so that a thoughtful and pragmatic approach is taken when setting our goals. We’re about to release our ESG Strategy shortly.

While there’s a growing importance placed on ESG by investors, it’s also important for our people, just as it is important for our communities and society generally. Our response to the growing awareness of environmentally conscious investors must focus not only on reducing harm but equally, on contributing positively to the broader societal response to these urgent issues.

We’re about to release our ESG strategy shortly.
Cath Parker – Head of Risk and Compliance, Risk and Compliance

7. Where would you like to see Cromwell’s ESG strategy in five years’ time?

I’d like to see that we don’t talk about ‘ESG strategy’ at all, we just talk about strategy – because it’s integrated in every part of the business, and the outcomes we seek financially, from risk management and from environmental, social and governance related goals become more ambitious over time, are consistently achieved.


8. What’s the benefit of taking an ESG-centred approach to our investors?

The community, and the world more broadly, expects more to be done in the ESG space – so, we must constantly strive to do good and be better. From an investor perspective, financial returns are of course an imperative. Ensuring that our investment approach includes ESG issues is also part of managing physical risks to assets, such as potential climate and weather impacts. The steps we take to future-proof our buildings may also result in reduced operational costs from infrastructure that is aligned positively with environmentally positive initiatives, e.g., using solar power and implementing energy efficiency upgrades. Because ESG factors will also shape and influence the value of real estate in the future, considering ESG may become increasingly important as a potential value driver in future investment decisions and impact return outcomes.


9. What do you enjoy most about your role?

The variety of work resulting from my role is hugely stimulating but most importantly, being able to link together various issues and make them simpler and more understandable is rewarding. Undoubtedly though, it’s the people at Cromwell that make my role enjoyable. The talent and experience within the Cromwell team is incredible, but it’s a bonus that they are genuinely great humans and colleagues as well.


10. What do you do to relax? / How do you spend your time outside work?

Home’s really important to me and, like many people, COVID-19 reminded me of the importance of family and trying to get the balance between work and play right. My husband and I enjoy escaping to our pad at Kings Beach when we can, with our daughter and dachshunds, Frank and Connie, in tow. We’re also currently making up for lost overseas travel time, with a couple of quick trips this year. I’m addicted to true crime podcasts, good books and, so far, I’m yet to meet a champagne I don’t like.

Between all of that, I do try to contribute to the greater good. I’m a director on several not-for-profit boards, including YMCA Brisbane. I am also on the board of Mercy Partners, who is the overall governance body for some hospitals, schools, and community service businesses. The work that these incredible companies do is something I’m very proud to play a small part in. Importantly, these opportunities give me opportunity to continue to learn and expand my own skills which, hopefully, makes me a better Cromwell team member.

Person typing on a laptop


November 16, 2022

Arbitrage opportunities in commercial property

Stuart Cartledge



Meet Gerald.

Gerald doesn’t sleep well because he’s always alert to market opportunities. He’s willing to transact in the middle of the night, seeking out small gains, sometimes with little risk. While he doesn’t sleep well, he sure has the money to eat well.


We didn’t catch this guy’s name.

He appears to be less flexible and prefers to follow a ‘steady-as-she-goes’ approach to investing. He sleeps really well, but because he doesn’t benefit from some of the opportunities that Gerald identifies, he has less money and doesn’t eat as well.


Which type of investor are you?

Investing in commercial property or infrastructure assets is a long-term game, and there’s no single strategy that always wins. However, at times, market distortions create opportunities for those with a little flexibility in their investing tool kit.

Following the sell-off in listed property securities since the beginning of 2022 (largely in response to rising interest rates), listed property provides investors with an exposure to commercial property at a substantial discount to very similar exposures in less liquid alternatives.

As Gerald identified, if you’re allocating capital to property, this current opportunity must surely be worth considering.

Like most market dislocations, these opportunities arise because different investors are driving different markets, and it takes time for arbitrages to close.

The following are some examples of investments that the Cromwell Phoenix Property Securities Fund has benefitted from in the past and some lessons to learn.

Sydney Airport – lower risk as an unlisted asset?


We recently wrote about the long journey that Phoenix’s clients enjoyed as shareholders of listed infrastructure stock, Sydney Airport, which delivered an annualised return from IPO to takeover of approximately 18% p.a.


This outcome was of course enhanced by a ‘take private’ transaction that sees the asset now held by a consortium of investors including some of the biggest industry funds. So how can unlisted investors pay more for an asset that has been listed for 20 years and had its value compound so strongly for so long?

One of the key attributes that Sydney Airport now possesses that it didn’t before, is that it’s no longer a volatile asset.

Incredible, isn’t it?!


The return profile, generated from aeronautical activities, retail and car parking will be the same. The entity will be subject to the same capital market conditions, particularly rising interest costs as its debt matures, and the impact of exogenous shocks such as pandemics and wars. However, instead of being revalued daily by global markets, the value of the entity will now be assessed by a team of ‘experts’, on a far less frequent basis, most likely quarterly. Thankfully, these experts don’t have to invest their own money at their own valuations.


An asset that is only revalued occasionally looks like its risk, or volatility, is low when compared to exactly the same asset that’s being valued daily by the share market. As a result of ‘apparent’ low risk, unlisted funds can (perhaps legitimately) pay more for these assets.

GPT Group – similar assets, different pricing

The same holds in listed property securities. While we’re happy to acknowledge listed markets are sometimes just volatile for the sake of being volatile (and that does keep some of us awake at night) they must also be respected for attempting to factor in new information as efficiently as possible.

In August 2021, Australian 10-year Government Bonds were trading on a yield to maturity of around 1%. Today, they are well over 3%. The value of almost any asset is impacted by this.

The listed property market has reacted, and investors can now buy a stock, such as GPT Group (ASX:GPT), for a material discount to its underlying asset backing. At the same time, GPT manages two unlisted wholesale funds, which in some cases hold assets in common with GPT’s own balance sheet. These wholesale unlisted funds are valued at book. They too have an apparent risk that is lower than GPT, but do they really?


Redcape Hotel Group – beer does help you sleep

Redcape Hotel Group was a listed owner and operator of pubs in NSW and QLD. However, after less than two years as a listed entity, the responsible entity determined that the listed market wasn’t properly valuing the stock, so a complicated proposal to delist was announced.

Phoenix took advantage of the transaction, to buy into the listed stock, and to ultimately sell the unlisted stock, locking in a listed versus unlisted arbitrage along the way. Our Redcape position rallied almost 40% in the first six months of 2022. Over the same period, the listed property sector fell by 23%.

We fully accept that markets, stocks and portfolio construction are complex matters. However, at times, there are low risk opportunities to take advantage of market dislocations. Listed volatility might keep us awake at night, but those investors who don’t bury their head in the sand and make decisions based on a clear understanding of exactly what they’re investing in, are likely to prosper.

Achieve long-term benchmark outperformance
Person typing on a laptop


May 26, 2022

Stock in focus: Sydney Airport

Stuart Cartledge


The successful completion of the takeover of Sydney Airport in March 2022 marks the conclusion of 20 years as a listed entity. Since the inception of the Cromwell Phoenix Property Securities Fund (the Fund) in April 2008, Sydney Airport (ASX:SYD) has been a core holding and a big positive contributor to the Fund’s returns.

From the early days, the potential upside of airports made for a compelling investment case for the Cromwell Phoenix Property Securities Fund. Airport ownership provides a myriad of opportunities to invest in commercial activities, particularly via the unregulated retail, car parking and property opportunities, which combined can often represent a greater proportion of airport revenues than aeronautical activities.

With respect to aeronautical activities, the privatisation of Sydney Airport was accompanied by the removal of price controls on aeronautical charges, enabling more flexible arrangements between airlines and the airport allowing for the provision of services to meet the demands of airlines.

The infographic below provides a timeline of Sydney Airport’s ascent, turbulence and smooth landing.


For an in-depth analysis of the 20-year journey and why Phoenix held a stake can be read here.