Hearts and Minds donates almost $10m to charity

Listed investment company Hearts and Minds Investments (ASX: HM1) will donate $5.1 million to 10 charities this week, in addition to the $4.1 million it already donated in March.

HM1 and its participating fund managers forego any investment or management fees and instead donate 1.5% of its net tangible assets per annum to various medical research institutes and charities.

HM1's core fund managers, who provide the listed investment company with their three highest conviction ideas, include Will Vicars and Michael Messara from Caledonia Investments; Peter Cooper from Cooper Investors; Hamish Douglass from Magellan; Philip King from Regal Funds Management; David Paradice from Paradice Investments; and Hamish Corlett and Tom Cowan from TDM Growth Partners.

The $5.1 million will be split across 10 medical research houses and charities, including The Victor Chang Cardiac Research Institute; The Florey Institute of Neuroscience and Mental Health; Swinburne's Centre for Psychopharmacology; RPA Green Light Institute; Black Dog Institute; Orygen; Charlie Teo Foundation; MS Research Australia; Kids Critical Care at Westmead Hospital; and the Brain and Mind Centre within the University of Sydney.

"These donated monies will be used by the medical research organisations to fund important research into the prevention and treatment of chronic diseases and mental health disorders," HM1 said in its annual report.

"The current pandemic highlights the critical importance of medical research to global health outcomes and economic prosperity."

HM1 recently reported a pre-tax investment return of 26.1% for the year ending  June 30, significantly outperforming its global benchmark (MSCI World Net TR), which increased 4.8% over the financial year.

Since its inception in November 2018, HM1 has generated a pre-tax return of 51.3%, compared to the benchmark's 18.2% over the same nearly two year period.

It outperformed the same index by 19.7% over the past six months, returning 15.9% compared to the benchmark's -3.8%.

HM1 chief executive Paul Rayson believes this is in large thanks to the investment company's holdings in Tesla, which they have held since November last year.

"Tesla has been a standout, but we also invest in Appen which is up over 100%, we participated in Spotify, which is up over 75%, while Zillow Group, Microsoft, and our holdings in next tier tech companies have also performed well," he told Financial Standard.

The listed investment company's largest holding (as of June 30) is Mineral Resources (7.54%), followed by Zillow Group (6.96%), Alibaba (6.7%), and Spotify (5.76%).

More than 5% of the portfolio's holdings are invested in Tesla.

While the portfolio is concentrated in a relatively small number of securities (only 28 as of June 30), it is overweight to communications, technology and consumer discretionaries compared to its benchmark.

"These sectors have performed well over the past year or two, but no one can predict the future," Rayson said.

"The way our model works is that we invest in the highest conviction ideas from our fund managers."

It is underweight to financials, utilities, healthcare and materials compared to the MSCI World Index.

Only six of the companies that HM1 invests in have a market cap over ~$68 billion (US$50 billion), while its smallest holding has a market cap of  $650 million.


This article was originally featured on Financial Standard here.