ANZ Funds Management has taken a new tack on equity funds management and is to use a mixture of active and passive styles for its $200 million New Zealand share portfolio.
About half of the funds will be managed passively, in-house, while the remainder will be actively managed by Coronet Asset Management and Sydney-based GMO Australia, which is part of Grantham, Mayo, Van Otterloo Group.
An interesting aspect to this combination is GMO Australia’s quantitative management style which involves the systematic identification and disciplined exploitation of market inefficiencies through the use of computer programmes.
“Their style relies on objective computer-based modelling rather than subjective measures,” ANZ Funds Management general manager Anthony Quirk says.
The models used look at three main areas of a company’s performance - value, momentum and turnaround.
Value refers to the more traditional ratios such as price to earnings, while momentum is similar to trends a chartist may look for, while turnaround is a computer analysis of any revisions made by sharemarket analysts.
Quirk says GMO’s approach to investing has a low correlation with the more traditional fundamental stock picking approach used successfully by Coronet.
“We did an historical analysis of their respective performances and confirmed their styles produced performance characteristics that complemented each other.”
ANZ was forced to re-consider its options for equity management after loosing its staff other fund management organisations.
Quirk says all the options were considered and this mix of outsourcing, plus a combination of active and passive management were chosen for several reasons.
“We had been a moderately active manager in the past but this no longer suited the market. With the current tax regime, there is no room for index huggers.”
He says it was more cost efficient to outsource the work as the total amount of New Zealand equity money ANZ managed was relatively small compared to its total of $1.7 billion under management.
Also, he believed equity management is done best by firms where the managers have a stake in the business, such as at Coronet, while banks tend to be good at managing cash and fixed interest investments.
The style being used for New Zealand equities is very similar to that which ANZ employs for its award-winning World Equity Trust.
“We believe the combination of styles within the active fund will provide investors with an option that is unmatched in this country,” he says. see earlier story
ANZ Funds Management has taken a new tack on equity funds management and is to use a mixture of active and passive styles for its $200 million New Zealand share portfolio.