Firetrail's Australian High Conviction Fund has earned a bronze rating from Morningstar after underperforming the benchmark by 11.7% in the year to September end.
The fund holds a concentrated portfolio of Australian stocks and is managed by former Macquarie high conviction team led by Patrick Hodgens who set up their own boutique under Pinnacle's banner.
It returned only 0.69% in the year to September end. By comparison, the benchmark S&P/ASX 200 Accumulation Index was up 12.47% during the time. Firetrail accounted for most of Pinnacle's institutional inflows from its 13 affiliates in the year ending June.
Morningstar notes that the fund is a solid option but investors should prepare for the volatility.
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"...underperformance since Firetrail's March 2018 inception to October 2019 provides a reminder to investors that returns are unlikely to look anything like the S&P/ASX 200 index," the research note said.
It recommends using this as a satellite allocation, within a more broadly diversified overall portfolio.
"We are confident the team can deliver outperformance over the full cycle, but reliance on a few high conviction stock bets will result in a high level of volatility."