ARCO Investment Management (previously Optimal Fund Management Australia) obtained its Australian Financial Services Licence (AFSL) in July, 2008 and launched its first fund, the Absolute Trust, in September, 2008 – two hours after Lehmann Brothers filed for bankruptcy in the US which was a major catalyst for the subsequent Global Financial Crisis.
Initially formed in partnership with Optimal Fund Management (Asia), a specialist Japan and pan-Asia absolute return manager, founders George Colman and Peter Whiting subsequently confirmed full and joint ownership of the Optimal Fund Management Australia business in 2012.
In July 2016, and after considerable client consultation, ARCO launched its Australian equities, long-only investment strategy for institutional investors, the Benchmark Independent Fund – seeded by one of Australia’s largest superannuation funds.
In 2017, ARCO forged a strategic partnership with the Burnham Group, a long-standing family office and private investment company, in which Burnham earned a minority interest in ARCO to support its growing absolute return business. Burnham also committed to a significant investment in ARCO’s equity long-short strategy.
Coincidentally in 2017, the company underwent a name change from Optimal Fund Management Australia to ARCO Investment Management. “ARCO”, derived from the Latin word meaning “arch”, was chosen as the new identity for the business reflecting the company’s commitment to delivering absolute return investment strategies to its clients, with an overarching focus on capital preservation.
ARCO Investment Management has a fundamental research approach to stock selection for clients, constructing and actively managing portfolios of listed equity securities that we believe are priced at levels that do not adequately reflect their underlying value.
We are fundamentally driven investors, and believe that alpha generation is hard work, requiring a deep insight into industry sectors and underlying companies, a willingness to assume out-of-consensus risk based on that work, and a flexible mind-set.
We view the equity market in Australia as highly efficient. As such, we believe that most high-liquidity, large-capitalisation stocks have an identifiable ‘fair value’ range, based on their comparative advantage to peers, growth rate, capital structure and allied fundamental considerations.
Our process is to combine intensive fundamental research with active consideration of non-fundamental factors, and is particularly interested in stock prices variances from our calculated fair value range, in either direction. We make it our business to find out why such variances are occurring, at both the fundamental (e.g. earnings, industry, or peer valuation dynamics) and market (typically liquidity or sponsorship changes) levels.