Kingston Carnegie operates a private investment fund for investors seeking significant out-performance of equity benchmarks. KC allocates investor's funds to a mix of cash and Australian listed equities, the latter equity portfolio has performed at 10.92%pa since inception in November 2011. The fund generates returns using a long-term, fundamental analysis based approach to acquire stakes in profitable businesses at an appreciable discount to their appraised value. There are 9 facets of KC that together, make its offering unique to investors:


KC's fund is invested in a balance of cash and Australian listed equities. Since inception in November 2011, KC's equity fund has performed at 10.92%pa compared to general market gains in the All Ordinaries index of 4.56%pa. In a climate of warm asset prices and cash rates averaging just 1.68%pa, the entire fund has achieved 4.74%pa after taking into account its ample cash holdings.


KC holds only cash investments and listed Australian equities. We make no attempt to bewilder investors into needing financial management. We believe that over the long term, the best way to make strong returns is to be owners of strong businesses. If there aren't any strong businesses on offer at an attractive price, then we enjoy the safety and freedom of cash until they become available. Any of our investors can understand our strategy, the trick is in the execution.


Because KC holds only cash and Australian listed equities, it is impossible to become insolvent. We have never, and will never, borrow against our investor's funds. Our businesses are already geared efficiently and we see no need to put our investor's funds at risk by borrowing against them. We believe that gearing an investment portfolio is similar to driving a fast car on an icy road. It will get you to your destination quickly, unless it wipes you out. Cars slide off the road at every major market correction because of the gearing they used, KC cannot be one of them.

Interest Alignment

No amount of rules or regulation will ever stop people doing what they want to do. The trick is to make them want to do what you want. As an investor, you want your fund manager to only win when he wins for you, and lose hard when he loses for you. At KC, we have a single, performance fee. KC cannot earn a cent until we make at least 7%pa for our investors. In addition, the manager of KC, Josh Kingston, has more wealth personally invested in the fund than the majority of co-investors. The people that make decisions on where your wealth goes should have skin in the game with you. KC's investors can take pleasure in knowing that if KC loses a single dollar of their wealth, the manager just personally lost five times as much or more. Proper interest alignment ensures the manager pursues returns without being reckless.

This isn't the case generally in the financial industry. Most people making decisions about where your invested wealth goes are all paid a salary whether they lose your wealth or not. Perhaps if they do a really bad job, they'll take a cash severance whilst browsing for another position. At KC, we only win when our investors do.


KC's fund is perfectly liquid at all times. Any request by an investor to liquidate any, or all, of their investment is honoured by the close of business that week. During the financial crash of 2008, many funds "locked the gates", disallowing investors from leaving because the fund's own debt obligations and illiquid assets prevented it from honouring an investor's will to leave. There is no timing or size restriction on unit sales. Investors can rest easy knowing that if an emergency strikes, their cash is always within arm's reach.

Low Fee

It is standard practice in the industry to charge a management fee of 1-3% each year on an investor's account, regardless of whether the manager has done a good job that year. At KC there is no flat management fee or transaction fees. There is only one, scaling performance fee of up to 30cents in every dollar made for an investor after the first 7% return each year. Unless KC achieves a return of 7%, there are zero fees at all on an investors account that year.

In addition, KC has implemented a "high water mark", whereby investors are not even charged the performance fee if the growth in investment value is simply growing back from below a previous year's high. Many investors paid large fees to managers through the 2009 market bounce after the 2008 crash, despite the fact that investors were really only seeing their wealth return closer to what it was in 2007. This can't be the case at KC and we won't charge fees on "gains" produced by market volatility.


KC is a small private fund and its size grants it some benefits that larger funds cannot access. Funds like the largest Australian super funds are burdened by managing $50 billion or more. With funds under management that large, an investment in a small firm, no matter how outstanding, would do nothing for investor returns because it would represent a tiny fraction of total funds invested. Because of KC's size, even a small company ($100 million market cap) can absorb a large portion of our investment funds and generate returns that larger funds, condemned to only invest in the ASX 50, can never expose their investors to.


KC is a private fund managed for investors. Josh Kingston, the manager at KC, maintains personal relationships with all of our private investors. Investors in KC know the person that has the final say on where their wealth is invested.

Asset Diversification

The average Australian's wealth is heavily concentrated within real estate, particularly residential real estate1. For Australians with investments outside their own home, the next step is often an investment property. Even when investing in the Australian equity market, Australia's big four banks, themselves heavily exposed to real estate, represent 25% of the entire market by value.2 Getting away from real estate is difficult in Australia. KC manages a fund that offers diversification to an investor looking for exposure outside of real estate.

Investment Philosophy

Kingston Carnegie (KC) is a value investor that extracts returns by differentiating between the prices of businesses listed on the Australian Stock Exchange and their intrinsic value, as evaluated by observing business fundamentals.

KC does not focus on any particular industry or sector; we look for four things and four things only in our businesses:

A simple business we understand
Strong, long-term, underlying economics
A skilled management team we trust
A price significantly below its intrinsic value

KC is not a diversified investor by the standard industry definition. Only a small percentage of the market meets these selective requirements. Diversification would only water down the quality of the businesses in the portfolio. KC is also not a particularly active investor for the same reasons.

After making a purchase, KC largely ignores the prices put on our businesses by the market and other investors, except to the extent that they become unrealistically high or low, where we will once again take advantage of them. The fund is following a long term approach where KC will not purchase a business without feeling comfortable about owning it for at least five years.

In regards to investing with debt, KC does not elect to augment investor's funds with credit. The businesses we own use debt efficiently already, so we choose to adhere to the old maxim; "If you're smart you don't need debt, and if you're dumb you've got no business being near it." The fund only holds cash, cash equivalents and listed equity. The fund cannot be insolvent.

We believe that risk and return are correlated most of the time. We do not agree with the statement that risk and return are correlated all the time. KC’s history and the history of value investors before it show that a sound business, conservatively evaluated, can be acquired from time to time at a price that offers both healthy returns and limited downside. Conservative evaluation is the hallmark of KC’s approach.

1. Household, Income and Labour Dynamics in Australia (HILDA) Survey. 2. ASX Market Data.
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