While much ado is made of the science that goes into fund manager research, real assessment puts comparable weight on the art as well according to investment leaders.
While financials and materials dominated trades leading into 2024, the popularity of other sectors like healthcare and information technology followed generational, and even demographic, lines.
The inside running for Zenith’s fund awards
Insiders at the Zenith Investment Partners annual awards know that you can improve your chances of guessing the winner of the major Fund Manager of the Year category by studying history.
For instance, in the past 10 years since the annual awards have been held – this is the 10th year – no winner of the most prestigious of the 22 awards has won without having also won at least one of the other main awards categories that year.
And given that momentum is as important to awards finalists as it is to funds management in general, it correlates positively with wins in other categories in previous years.
There are also other clues, such as the fund’s current rating awarded by the Zenith research team, the past year’s investment returns and, to a lesser extent, popularity with investors as measured by fund flows.
So, with that in mind, we present the first of a two-part series on the finalists in some of the main categories for the 2021 awards, to be held virtually on October 15.
The winners will be announced via live stream from a studio in Melbourne, starting at 12pm, presided over by: David Wright, Zenith’s co-founder and CEO; Bronwen Moncrieff, general manager and head of research; and John Nicoll, national head of sales.
Bronwen Moncrieff says that the judging methodology (available on the Zenith website) involves a combination of quantitative factors, such as investment performance in the asset sector categories, as well as fund flows and adjustments for style when necessary. For instance, with value out of favour for nearly 10 years until late last year, an adjustment has been necessary to enable consideration to be given to the good performers within that style.
“The methodology really comes down to two key components,” she says. “One, is the rating we give them, the most significant parts being to capture their philosophy, people, process and portfolio construction. Second is their performance, which is not just for the past year but also for previous years.”
This week at ‘Inside Adviser’ we highlight the finalists for Australian equities large caps and Australian equities small caps, as well as the popular Rising Star award. Next week we highlight international equities large caps, the new category of international equities small caps, and Australian fixed interest category finalists.
Australian equities, large caps finalists: Bennelong Australian Equity Partners; Greencape Capital; and Pendal Group.
An affiliate of Challenger’s Fidante Partners, Greencape is a Melbourne-based boutique equities specialist with about $9 billion under management (at September 2020) but cognisant of capacity limits, which it regards as a competitive advantage.
It is a traditional active style-neutral (GARP) manager with a high contact rate with investee companies, suppliers, major customers and competitors.
Its ‘Broadcap Fund’, launched in September 2006, has had an average annual return since inception of 12.03 per cent (before fees), compared with the S&P/ASX300’s 7.14 per cent. The ‘High Conviction Fund’, launched at the same time, reports an annual return of 11.67 per cent since inception, compared with the S&P/ASX 200’s 7.18 per cent.
Short-term performance has not been as good, especially in the 12 months to August when the 28.58 per cent return was 1.9 percentage points shy of its benchmark.
Bennelong Australian Equity Partners, an affiliate of Bennelong Funds Management, was founded by CIO Mark East in 2008. He oversees five funds for both retail and institutional investors.
The flagship Bennelong Australian Equities Fund has also performed very well long term, with an annual return of 15.9 per cent since inception in January, 2009 (against S&P/ASX300 benchmark of 10.8 per cent). But it performed exceedingly well in the 12 months to August this year, with a return of 40.8 per cent (against benchmark 28.58 per cent).
The growth-orientated manager prides itself on its research, emphasising factors which make up earnings prospects. “We seek to invest in reliable predictable businesses which we can research with purpose,” the manager says.
Pendal Group, a manager with arguably the most illustrious pedigree on the Australian landscape, has seven Australian share funds, under well-known head of equities Crispin Murray.
Its flagship Pendal Australian Share Fund, launched in 1992, is based on a core strategy targeting medium-long-term outperformance.
Annual performance since inception for this fund is 11.06 per cent (to September this year), against its benchmark return of 10.08 per cent. Shorter term performance has been solid, too, if unspectacular.
Australian equities, small cap finalists: Eiger Capital; Fidelity International; and Spheria Asset Management.
Founded in 2019 by portfolio managers Stephen Wood, Victor Gomes and David Hadded, who have worked together since 2011, Eiger Capital focuses on company cashflows to determine intrinsic value versus price.
The fund is fairly high conviction, with between 30-50 stocks consisting of the trio’s “best ideas”. Performance has been excellent, albeit over a short period.
The two-and-a-half-year annual return since inception is 25.96 per cent (after fees), compared with the Small Ordinaries benchmark of 14.56 per cent. The 12-month figure to August is 44.90 per cent (benchmark 29.51per cent). The fund has a ‘highly recommended’ rating from Zenith, which can’t hurt its award prospects.
Fidelity’s Australian ‘Future Leaders’ fund consists of a portfolio of between 40-70 small and mid-cap stocks, run by portfolio manager James Abela, who joined Fidelity in 2004. The fund was launched in July 2013.
It has comfortably beaten its benchmark over all longer-term periods, with an annualised return of 15.19 per cent since inception, versus its benchmark of 12.41 per cent. Short-term performance, however, has not been as good, with a 12-month return to August of 23.71 per cent versus the benchmark’s 30.23 per cent.
Interestingly, its biggest overweight stock position is in multi-affiliate manager Pinnacle Investment Management Group, which has been a strong stock-market performer in recent years.
Spheria Asset Management, which manages four funds including an Australian and a global microcap fund and an ‘opportunities’ fund, was founded by Marcus Burns, Matthew Booker and Adam Lund in 2010. The firm has a team of 10 investment professionals.
The main Spheria Australian Smaller Companies Fund, run by the three founders, has an annualised return of 12.7 per cent as of July 2021, against a benchmark return of 10.2 per cent since inception in 2016. Performance for the past 12 months has been stellar – 54.5 per cent in the year to July against a benchmark return of 32.3 per cent.
Rising Star finalists: Eiger Capital; Federation Asset Management; and Sage Capital.
The three portfolio managers running Eiger Capital, the small-cap category finalist too, worked together on the UBS Australian small companies fund, of which Stephen Wood was lead portfolio manager. They have raised over $300 million in funds under management in their first two years. The name ‘Eiger’ is to reflect not only their Swiss connection at UBS but also the ambition to “strive for great heights”, like the mountain.
Federation Asset Management is a private equity manager specialising in the ESG space. Formed in 2018, its first fund has earned an IRR of 20.8 per cent since inception.
Founded by former Macquarie distressed debt executive Cameron Brownjohn, Federation “aims to become Asia-Pacific’s leading investor in renewable energy, health & education real estate and operating companies with strong growth potential,” it says on its website.
Early investments include: e-commerce logistics company Sendle; consumer finance and auto-sector lender RateSetter Australia; wind farm developer and operator Windlab; research trials company George Health; a portfolio of childcare properties bundled in the Federation Education REIT, and disability housing trust Synergis, according to a report last year in the ‘Australian Financial Review’.
Sage Capital is a long-short Australian equities specialist founded in 2019 by Sean Fenton, who had previously started and run the successful alpha-extension fund at Tribeca Partners. He was joined by two Tribeca colleagues, James Delaney and Peter Moore, a quant analyst. The fourth member of the portfolio management team is Kelli Meagher, who worked with Fenton at AMP Capital.
Sage has two funds; a market-neutral Sage Capital Absolute Return Fund and the more traditional Sage Capital Equity Plus Fund, which is benchmarked to the S&P/ASX 200.
Performance of both has been very good. The market-neutral fund has returned 9.44 per cent since inception (versus a cash benchmark of 0.29 per cent) and the ‘equity-plus’ fund 16.09 per cent versus its benchmark of 9.88 per cent. One-year returns are 5.11 per cent (benchmark 0.06 per cent) for the market-neutral fund and 31.43 per cent (benchmark 28.56 per cent) in the period to July.
For the record, there is a short list of candidates already drawn up for the Fund Manager of the Year Award, but it has not been disclosed. Of some assistance may be the knowledge that recent winners were: 2020 – Pendal Group; 2019 – Magellan Asset Management; and 2018 – PIMCO.
Happy guessing. And remember, guess responsibly.
Information and registration:
https://www.zenithpartners.com.au/zenith-fund-awards-2021/
