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Arnhem Investment Management winding down

Emma Rapaport  |  06 Jun 2018Text size  Decrease  Increase  |  
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Australian boutique fund manager Arnhem Investment Management is preparing to wind down its investment business following years of disappointing performance.

The firm, established by managing partners George Clapham, Mark Nathan and Neil Boyd-Clark in 2010, told analysts it would close both the Australian and global equity investment business. 

Morningstar understands that all parties, including Equity Trustees as the responsibility entity, and BNP Paribas Asset Management, which owns 40 per cent of Arnhem and is responsible for administration and distribution, are in talks around the future management of the strategy and investment funds.

Morningstar analysts have placed Arnhem Australian Equity “under review” until further details are known from the responsible entity.

"We think that Arnhem’s announced intention to close the business but not clarify a specific plan or time frame creates a significant amount of uncertainty," Morningstar analyst Sarah Fox says.

Analysts first downgraded the fund in September last year to “neutral” – meaning analysts have no conviction that the fund will outperform the index or peers.

For now, the firm's managing partners will continue to manage the fund while Equity Trustees and BNP Paribas deliberate. However, the decision ultimately lies with Equity Trustees.

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BNP declined to comment, and Arnhem could not be reached.

The Arnhem Investment Management brand was first established in 2010 with BNP Paribas Asset Management taking 40 per cent ownership.  Before that, the firm was backed by ABN AMRO (2000), before moving under the umbrella of Fortis Investment Partners in 2008.

Despite an impressive start, Arnhem ran into trouble in 2014/15, rocked by waning share prices for BHP Billiton, Santos, and Crown Resorts. Disappointing stock selection in the 12 months to 30 June 2017 also caused pain, notably international telco Vocus Group (ASX: VOC), which cost the fund significant performance.

Arnhem Australian Equity fund performance

Arnhem Australian Equity underperformed the S&P/ASX 200 index in 2014, 2015 and 2016

"Arnhem Australian Equity retains an experienced and knowledgeable team with a long history working together," Fox said at the time of downgrading to neutral.

"However, the process and level of due diligence we once held in high regard has neither helped Arnhem avoid some painful stumbles nor capitalise on growth opportunities as effectively as some rivals over a sustained period. Our confidence has diminished as a result."

The firm currently oversees three funds – the Core Australian Equity Fund, the Concentrated Australian Equity fund, and the Long Short Australian Equity fund, as well as two high conviction Separately Managed Account (SMA) portfolios – Australia+ and Global Growth. 

Top holdings for Arnhem Australian Equity at April 30 were Westpac Banking Corp, BHP Billiton Ltd, Commonwealth Bank of Australia, National Australia Bank Ltd and Wesfarmers Ltd. 

Arnhem's senior team may launch new funds in the future, according to reports in the Australian Financial Review.

 

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Emma Rapaport is a reporter for Morningstar Australia.

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