Fund Times: Updates for Aviva, Barclays Global Investors, BlackRock, Macquarie, Perennial, SG Hiscock
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In recent news from the funds management industry, Aviva Investors is not part of the sale of its parent's Australian wealth management businesses to National Australia Bank; BlackRock is to acquire Barclays Global Investors; there are changes to the Macquarie-offered BRIC Advantage and Morgan Stanley Global Franchise funds; and Perennial Global Equities and SG Hiscock have appointed new staff.
Aviva investors not part of sale of parent's Australian interests
Aviva Australia Holdings announced on 22 June that it had sold a number of its Australian wealth management businesses to the National Australia Bank. These included Norwich Union Life, the Navigator investment platform (which had approximately A$4.07 billion in assets under administration at 31 March 2009 according to our Market Share Report), and strategic stakes in four financial planning firms.
The sale did not include Aviva Investors Australia, the former Portfolio Partners funds management business. In a statement to the market, Aviva Investors Australia said that it had specifically been excluded from the sale "as part of the Aviva group's commitment to building a global asset management business incorporating the Australian market". According to our Market Share Report, Aviva Investors Australia had approximately A$6.40 billion in assets at 31 March 2009, down 16.0 percent from A$7.62 billion at 31 March 2008.
We currently have fund analyst research and recommendations for Aviva's Australian listed property, Australian shares, smaller companies, and Elite Opportunities and High Growth Shares investment strategies, and are not at this stage making any changes to these existing recommendations and reports.
BlackRock to acquire Barclays Global Investors
Barclays plc announced on 12 June that it had received a binding offer from BlackRock, Inc. to purchase the Barclays Global Investors business. Barclays will get BlackRock shares as part of the deal, giving it an economic interest of 19.90 percent of the enlarged BlackRock Group, which will be renamed BlackRock Global Investors. BlackRock has indicated that the transaction will be completed in the fourth quarter of 2009, subject to necessary regulatory approvals and other closing conditions.
Barclays Global Investors and BlackRock both have established funds management businesses in Australia. These businesses are to a large extent complementary rather than overlapping – Barclays primarily offers index and quantitative solutions (including exchange-traded funds), while BlackRock offers active fundamental research products.
We have reassessed our existing Morningstar Recommendations for both fund managers, and at this stage don't advise investors to make any changes to their portfolios on the basis of the likely acquisition. We expect that successful investment teams and processes will be retained (for instance, BlackRock's Global Allocation funds under Dennis Stattman's highly-capable leadership).
Changes to Macquarie BRIC Advantage, Morgan Stanley global franchise funds
The Globalis BRIC Advantage and Morgan Stanley Global Franchise funds, offered in Australia by Macquarie, have both undergone changes in recent months.
Macquarie has now rebranded the former Globalis BRIC Advantage funds as Macquarie BRIC Advantage, having completed the acquisition of US-based Globalis Investments in October 2008. The funds affected are Macquarie BRIC Advantage, Macquarie BRIC Advantage Hedged, and Macquarie BRIC Advantage Unhedged. The fund manager has removed the abilities to short-sell companies and to invest in securities to obtain debt exposures, and has cut the investment minimums to A$50,000. We have made these adjustments on our database.
In January 2009, long-tenured Morgan Stanley Managing Director Hassan Elmasry – who has run the Morgan Stanley Global Franchise investment strategy since it was launched in Australia – announced that later in the year he would be leaving to establish his own independent asset management firm. In March, Morgan Stanley announced that the remaining members of the Global Franchise team would be joining Elmasry in his new venture. (Morgan Stanley appointed Peter Wright and William Lock from its international shares team as replacements.)
Evaluating the impact of these new developments in April, we maintained our existing Morningstar Recommendation at 'Hold', commenting that "more than two decades of investment experience, commendable levels of insight, and stringent valuation discipline [were] walking out the door, and substitutes will have big shoes to fill", and advising investors contemplating investing to stay away.
Elmasry and his colleagues have now established their own funds management business, called Independent Franchise Partners ('IFP'). Macquarie has elected to appoint IFP as investment manager of Australian-sourced assets, and has renamed the fund IFP Global Franchise. Our fund research team is currently working on an update to our existing research report to reflect these changes, and we have renamed the fund on our database.
Global Franchise invests in firms with demonstrated franchise quality, in the belief that these have sustainable competitive advantages because intangible assets such as franchise and brand are difficult to replicate compared to physical assets, which in the modern corporate environment can be commoditised. This investment philosophy and the kinds of investments it engenders mean that Global Franchise's largest holdings at 31 May 2009 were dominated by tobacco companies British American Tobacco, Imperial Tobacco Group, and Philip Morris International, as well as prominent brands such as Anglo-Dutch firm Unilever – well-known in Australia for products such as Dove soap and Pears shampoo – confectionary maker Cadbury and pharmaceutical company Novartis.
Perennial hires in international, growth domestic shares
Perennial Global Equities has replaced Analyst Nyan Sheth with Graham Hay. (Sheth has returned to the United States to study.) Hay was previously a global shares portfolio manager with Merrill Lynch in London, and before that worked in analyst roles at Blue Crest Capital and First State Investments UK. At Perennial, Hay will analyse technology, media, telecommunications, and alternative energy companies.
Hay has joined the team led by Clay Carter responsible for the management of funds including Perennial International Equities, Perennial International Shares Wholesale, and Perennial Global Shares High Alpha. Our fund research analysts currently rate the latter as 'Investment Grade', noting that sturdier offerings are available with less business risk and more appropriate fee structures.
In other Perennial news, the firm has also hired Brendan James as a Senior Equities Analyst for Lee Mickelburough's Perennial Growth team, which invests the assets of funds such as IOOF/Perennial Flexi Trust – Growth Shares, Perennial Growth Shares Wholesale, and Perennial Growth Australian Shares. James spent the past three years as a Resources Analyst with Deutsche Bank and JP Morgan, and before that 10 years in the mining industry as a metallurgical engineer with WMC Resources and Rio Tinto. He'll start at Perennial in August.
SG Hiscock appoints for absolute return funds
Melbourne boutique SG Hiscock – investment manager for a number of funds distributed by Equity Trustees – has appointed Frank Bongiorno as Portfolio Manager to the team headed by Sam Scollo which manages EQT SGH Absolute Return and EQT SGH Wholesale Absolute Return. Bongiorno spent the past 14 years at Macquarie Bank working in technical analysis and futures trading, and six years before that at the Commonwealth Bank.
Both Absolute Return funds are currently one-star funds in the Australian Large Growth shares category. (They've both been fourth-quartile performers compared to their peers over the past six months, one, three, and five years.) In our most recent report on the Absolute Return strategy, we assigned it a Morningstar Recommendation of 'Investment Grade', commenting that the strategy's "quirks mean that it's not a mainstream option, but for investors looking for a Supporting Player that's definitely different from peers, [it] might be worth a look".