Large funds can deliver big returns
Common misperception that large funds fail to deliver big returns presents potential opportunity loss for Australian investors, Capital Group said.
According to the firm, which manages the global equity fund, New Perspective Fund (NPF), the size and scale of the fund often came with significant advantage.
Speaking at a media briefing in Sydney yesterday, Capital Group’s head of Australia, Paul Hennessy, said: “It is an interesting topic because it does seem to be very much part of Australian culture that big funds, understanding is that big funds don’t generate alpha.
“In fact, we are saying it does not to have to be a case.”
Capital Group’s investment director Andy Budden explained that the NPF, which was brought to Australia and invested mostly in mid-cap and large, multinational companies with global presence, was successful thanks to the way in which the company structured its portfolio.
“If there was a 70 billion dollar fund that was managed by single portfolio manager making investment decisions I think you’d have real problem on your hands,” he said.
“That is not how we manage the fund. The fund is divided into a series of separate sleeves so there is actually seven sleeves managed by individual portfolio manager.”
He also said that the fund represented “a tiny part of the investment universe.”
“This is a global fund also investing in the emerging markets – this fund is only 0.14 per cent of its investment universe so it’s clearly very, very small comparing to the opportunity,” he said.
NPF, which had over 40 years of track record and US$70 billion in funds under management (FUM), had also very low turnover.
“We do hold stocks for a very long period of time – about more than half of portfolio holdings have been there for at least five years. So the turnover for the portfolio is only 25 per cent per annum,” Budden said.
Budden also said two thirds of the trades done on this fund could be completed in less than two days and 80 per cent of the fund could be liquidated in less than 10 days.
“We are delighted with the progress the fund is having in Australia at the moment – we’ve just gone under 85 million dollars in the local vehicle just after two years and we have very strong research support from Morningstar and Lonsec and SQM,” Hennessy said.
AUTHOR
Oksana Patron
Recommended for you
AUSIEX has announced it will acquire FIIG, a specialist fixed income provider with $4.5 billion in funds under advice.
Platinum Asset Management has announced it is in discussions with a global alternatives fund manager regarding a possible merger to create an $18 billion firm.
Frontier Advisors has bolstered its Japanese footprint through a partnership with the $350 billion asset management arm of Nippon Life Insurance Company.
JP Morgan Asset Management has appointed an ETF specialist from Vanguard as it seeks to expand its ETF range.
