$55m dividend caps Paradice’s big year

Stock picker David Paradice had one of his most profitable years in 2018, paying himself and staff a $55 million dividend.

Stock picker David Paradice.

Stock picker David Paradice had one of his most profitable years in 2018, smashing benchmarks and paying himself and staff a bumper $55 million dividend.

Mr Paradice’s Paradice Investment Management made an operating profit of $78m in the year to June 30, 2018, documents uploaded to the Australian Securities & Investments Commission show.

The firm paid shareholders — the largest of whom is Mr Para­dice — a dividend of slightly more than $55m to record a net profit of $23.6m from $138.5m in revenue.

The results were well up from 2017, a year in which Paradice Investment Management made an operating profit of $50.5m from $74.6m in revenue.

Mr Paradice is one of Australia’s most renowned small and mid-fund managers. He oversees a boutique firm that manages about $17 billion for superannuation and investments funds, which is invested in Australian and global stocks.

The money is managed by a small team in Sydney and Denver, Colorado, where Mr Paradice relocated to in recent years and where Kevin Beck runs the firm’s global small to mid-cap fund.

Paradice Australian equities fund - biz art

Paradice Investment Management’s stellar results for the year ensured its portfolio managers were handsomely rewarded. As well as sharing in the dividend, the firm’s employee benefits expense rose from about $9m in 2017 to $33.7m last year. Documents made available to Paradice Investment Management clients show each of the firm’s funds beat their benchmarks in the 2018 financial year.

The firm’s large-cap fund returned 8.75 per cent net of fees, more than doubling the benchmark S&P/ASX 200 Accumulation return of 4.29 per cent.

The global small to mid-cap fund made 16.93 per cent net of fees, while its benchmark S&P BMI $US1bn to $US5bn cap index range made 15.71 per cent over the same period.

In Australian equities, the Paradice small cap fund returned 27.2 per cent net of fees, outperforming its benchmark Small Ordinaries Accumulation Index result of 24.25 per cent, while the mid-cap fund made 18.68 per cent. That compared with the 17.31 per cent benchmark comprising 70 per cent of the Midcap 50 Accumulation Index and 30 per cent of the Small Ordinaries Total Return Index.

Mr Paradice established his firm 20 years ago. The latest results posted by Paradice Investment Management exceeded those recorded by other boutique firms such as Peter Cooper’s Cooper Investors, which had an operating profit of $36.8m, and Sydney quant-driven fund Vinva Investment Group, which had a $44.5m profit.

But like many stock pickers, Mr Paradice’s firm may struggle to replicate their success of last financial year, with markets around the world falling rapidly towards the end of 2018.

Several of his funds had small negative returns towards the end of 2018, as did their benchmarks.

Mr Paradice’s firm made some big moves towards the end of the year, taking new stakes in several mining and industrial stocks.

Paradice Investment Management emerged with stakes of more than 5 per cent in mineral sands company Iluka in mid-December, after buying a similar shareholding in plumbing firm Reliance Worldwide Corporation the previous month.

That move came at the same time that it took a 5 per cent stake in casino and resorts company Star Entertainment Group.