Overview:

Fiducian Group is a financial services business that can be split into 3 segments:

• Platform administration - Provides an admin platform and tools for financial planners.
• Funds management - Run a range of funds that have generally done very well. Mostly within the super categories but also have a tech and India funds.
•  Financial planning - 80 financial planners in 45 offices.

The company is run by executive chairman Indy Sigh who holds around 1/3 of the company and is the founder. Performance mirrors that of what you would expect of an insider running the business. The company has been a consistent compounder over the last 10 years growing revenues and EPS. The company has a high ROE mainly thanks to a high payout ratio of dividends from earnings and increasing EPS.  

Main Thesis:

Thesis can be summarised by the following points:

• Consistently and stable compounder in terms of EPS and revenue growth.
• High ROE business and has been able to consistently maintain this.
• Decent dividend yield at around 4.8% (fully franked).
• Founder with significant skin in the game running the business.
• Australian financial services industry has the constant tailwind of superannuation money for sustained inflows no matter the environment.
• The funds management business is high performing compared to its peers. 
• Growth appears to have been steady and share price generally mirrors this. Overall a stable company with stable share price. 
• I couldn't find any evidence of direct findings against Fiducian as a result of the Royal Commision into financial services even though they do have vertical integration. 
• Seems to have decent transparency for example releasing 4C's quarterly to update investors even when they are not required. 
• Buying at a reasonable valuation of around 18x PE. Not cheap but not expensive. Will look to 
• Directors have been consistently buying shares on-market. Not huge amounts but the consistency of buying without selling is interesting. See image below (thanks to Market Index for information).  
• Share price chart is bottom left to top right moving without significant volatility most of the time. 

Risks:

• Thesis is strongly based on company continuing to be able to execute has they have before and that this growth will continue. 
• Founder moves on/retires. 
• Platform competing against other big players. 
• ROE falls way. Would show capital allocation deterioration or EPS growth slowing. 
• Returns of managed funds start to underperform.
• Illiquid, small trades can be the cause of noticeable price changes. 
• In-housing of investment management by super funds driving down overall fees available for others in the industry. 
• Increasing popularity of ETFs. 
• Regulatory pressure or regulation. Removal of ability to vertically integrate. 
• "Roboadvisors" start to become more attractive and effective than traditional funds management businesses.

Investment KPIs:

• Maintain a high ROE.
• Stable growth in dividend.
• EPS growth of 12%+ over time.
• FUM continue to grow = continued revenue growth at around 10% or greater (depending on market conditions). 

When to get out:

• Profit downgrades/EPS doesn't continue to grow.
• FUM doesn't grow.
• Founder leaving without a long transition planned.
• Funds performance especially conservative to growth don't continue to outperform compared to other managers.
• Founder starts to sell significant portions of shares. 
• Price below soft stop loss point (ie negative momentum).

Bought on Strawman and IRL.