Fund Times: Updates for APN, Colonial, INVESCO, Macquarie, SG Hiscock, Suncorp/Tyndall
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In recent news from the funds management industry you may have missed, APN is reopening its flagship Property for Income Fund; Colonial First State has hired a global property analyst; INVESCO has switched its management of large-cap Australian shares to a quantitative process; Macquarie has appointed more staff to its infrastructure team, and SG Hiscock to its Absolute Return and SGH20 funds; and the combined Suncorp/Tyndall funds management business has hired former BT credit head John Sorrell.
APN reopens Property for Income Fund
Melbourne property boutique APN Funds Management has announced that it's reopening APN - Property for Income, three years after it was closed to new money.
APN also said that it would be increasing the proportion of the fund's A$1.24 billion assets allocated to offshore property stocks, from the existing maximum of 15.0 percent of earnings to a potential 50.0 percent of index weightings, thereby increasing the eligible universe for investment. (APN's income focus means that its domestic opportunity set is less than many of its competitors.) The fund is also invested in unlisted property, which comprised 24.20 percent of the portfolio at 31 March 2008.
In our report on Property for Income, published in February, we allocated a Morningstar Recommendation of 'Recommended', describing the strategy as being an attractive package overall, with a conservative process, stable team, and a great track record. Property for Income is a five-star fund in the Australian Real Estate retail investment trust category, and APN was our Fund Manager of the Year Listed Property for 2007.
Colonial First State hires in Global Property
Colonial First State continues to build up its global property funds management operation, hiring Jessica O'Brien for the position of Property Securities Analyst, North American Property Securities, reporting to Head of Property Securities John Snowden.
O'Brien will work in New York with last year's hires Barry Oxford and Marc Lederman on the North American market, contributing stock ideas for funds including Colonial First State Wholesale Colliers Global Property Securities and Colonial First State FirstChoice – Colonial First State Colliers Global Property Securities. She was previously an analyst with domestic property boutique Resolution Capital, and worked before that with Ernst & Young Real Estate Advisory Services and Colliers International in Brisbane.
Our current Morningstar Recommendation for the Colonial First State/Colliers global property strategy is 'Investment Grade'. This is on the grounds that while we consider this a solid way of achieving global property exposure, the team running the strategy remains small relative to most peers; the European team has limited experience in that region; and the rollout of the process around the world has yet to be proven conclusively.
INVESCO goes Quant in Domestic Large-Caps
A year after the departures of former Head of Australian Equities Rohan Walsh and Investment Manager Luke Sinclair, INVESCO has announced that it is switching management of its large-cap Australian equities assets to a quantitative investment process.
The approach has been created by the firm's Frankfurt-based INVESCO Quantitative Strategies Group, which manages over A$30.0 billion worldwide, including the INVESCO Global Matrix funds offered in this market. The process will be implemented locally by Arthur Roumeliotis in a new position as Head of Quantitative Portfolio Management – Australia. Roumeliotis has worked previously in quant investing at JANA Investment Advisers, Macquarie Bank, Ord Minnett, and Barclays Global Investors.
The move means that INVESCO joins Acadian, Barclays Global Investors, boutique Continuum, Dimensional, and GMO in offering solely quantitative approaches to investing in large-cap Australian shares, while AMP, BlackRock, and Perpetual offer quantitative as well as their fundamental capabilities. INVESCO's smaller companies investing remains fundamental under Cynthia Jenkins' management. The shop has also indicated that it intends in the future to offer long/short as well long-only large-cap portfolios.
At the time of the departures, we moved our Morningstar Recommendations for INVESCO – Wholesale Australian Share and INVESCO – Australian Share to 'Avoid', describing the departures as "a devastating blow to a house that was finally starting to build some traction... with this capability", and noting that none of the three remaining team members had any portfolio management experience.
We'll be watching developments here closely, and will reassess our existing Morningstar Recommendation when we undertake our next round of research on large-cap strategies later this year.
Macquarie appoints to Global Infrastructure Team
Macquarie Funds Management has added to the team running the A$440.26 million Macquarie International Infrastructure Securities with the appointments of Jonathan Ong as Portfolio Manager for emerging markets infrastructure, and Julian Coghlan as Product Specialist. The new recruits bring the team size to four portfolio managers and seven analysts, led by Jon Fitch.
Ong is a former Credit Suisse and BT emerging markets and Asia-Pacific telecoms portfolio manager and analyst, while Coghlan spent 10 years at UBS Global Asset Management in client relationship management and business development, before that working as a fixed interest portfolio manager at ANZ Funds Management and the South Australian Government Financing Authority.
Macquarie uses bottom-up fundamental research to assess the quality of the infrastructure assets owned, operated, or managed, and which underpin companies' cashflow generation and potential growth. Up to 20.0 percent of the portfolio may be in unlisted securities, and up to 20.0 percent geared. The International Infrastructure Securities Fund comes with a one percent annual fee, plus a performance fee of 10.0 percent of outperformance of a custom infrastructure stocks index.
The five largest holdings in the portfolio at 31 December 2007 were Macquarie Infrastructure Group; Cintra Concesiones de Infraestructuras de Transporte, a Spanish toll road and car park operator whose assets include roads in Spain, Portugal, Ireland, and the US; oil and natural gas transporters Enterprise Products Partners, and Energy Transfer Partners; and Transurban, whose assets include the Melbourne CityLink motorway and Sydney’s M1, M2, M4, M5, and M7 highways.
SG Hiscock adds staff
Melbourne boutique SG Hiscock has made several appointments.
The shop has hired former ANZ corporate finance manager Michael Clarke to work on SGH Long/Short and as an industrials analyst, and Tim Wood as assistant portfolio manager/analyst helping Robert Hook run SGH20. Wood worked previously at Morgan Stanley and in roles at private equity and wealth management firms in London and Australia.
Clarke and Wood's appointments follow that in January of James Evans, formerly a resource stocks analyst at stockbroker Tolhurst and at ANZ Institutional Banking, to work with Sam Scollo running EQT SGH Wholesale Absolute Return and EQT SGH Absolute Return.
SGH20 is a concentrated portfolio of Robert Hook's 20 best investment ideas. In our most recent report on the strategy, we gave it a Morningstar Recommendation of 'Hold', signalling investors to place no new monies. We noted the limited staff resources – at that time, effectively Hook alone – and the lack of attention to valuation in stock selection, concluding that "we don't feel that there is enough evidence to back this strategy over more tried and tested approaches". Wood's appointment as an assistant is a move in the right direction in terms of staff resourcing, although Hook remains a key person risk given the dependence on his choices, while our concerns about the process remain unchanged. We have therefore restated our existing Morningstar Recommendation of 'Hold'.
The Absolute Return strategy invests in a mixture of Australian and New Zealand shares, cash, and derivatives, and portfolio managers can short-sell stock positions. The portfolio had a net equities exposure of 61.90 percent at 29 February 2008, its principal holdings including BHP Billiton, Rio Tinto, Woodside, AXA Asia Pacific, Woolworths, Newcrest Mining, and WorleyParsons. In our most recent research report, published in February 2007, we gave Absolute Return a Morningstar Recommendation of 'Investment Grade', but advised that it should be used as a Supporting Player in a portfolio given its eclectic nature, describing it as a "quirky strategy [with] a degree of appeal".
Suncorp/Tyndall appoints former BT Credit head
The income side of the newly-merged Suncorp/Tyndall funds management business continues to take shape, with the appointment of former BT Financial Group Co-Head of Income John Sorrell to the new position of Head of Credit. Sorrell will work with Head of Fixed Income Roger Bridges managing funds such as the five-star Tyndall – Australian Bond.
As well as his two years at BT, Sorrell worked previously at Merrill Lynch Investment Managers (now BlackRock), Macquarie Investment Management, and Credit Suisse First Boston. Other recent appointments in the income area have included Head of Portfolio Management Darren Langer (from Perpetual) and Senior Credit Analyst Ileria Chan, who has returned to Tyndall after a year working with Sorrell at BT.