NZIT, which is a UK listed investment trust, has used Auckland-based Coronet Asset Management to advise its manager, English-based Exeter Asset Management, on stock selection over the past three years.
However, the board have been concerned about the fund's recent poor performance and have been worried since last year that shareholders will vote to wind the fund up at its annual meeting in London next month.
The reason for this worry is that every five years NZIT shareholders get to vote on a motion to continue on with the fund.
NZIT has to put the continuance vote at its next annual meeting and felt that after three years of poor performance shareholders would pull the plug.
To address this issue the NZIT board has decided to dump Coronet and replace it with BT Funds Management and Fisher Funds Management.
NZIT director Brian Gaynor says the board sought a new advisor for the fund because they were not sure shareholders would vote for continuance.
If the vote failed one of the largest New Zealand equity funds may face liquidation.
Gaynor says the board are still not sure shareholders will vote for continuance.
"We obviously still have to convince (shareholders)," he says. "We can never take it for granted that (continuance) is going to be a certainty."
Chairman Don Campbell says the "directors unanimously recommend that shareholders vote to continue with the company as an investment trust."
However, Coronet director James Ring is predicting that shareholders will call for the fund to be wound up.
Gaynor believes that to keep the fund going there was no choice but to change advisers. He says the new mix of advisers (who take over on Thursday) are a better alternative to what Coronet offered.
NZIT went for Fisher Funds Management as its manager Carmel Fisher was a manager who is "absolutely true to style."
He says her portfolio is growth orientated, and it tends to favour smaller companies that have excellent management.
"There is not a single stock in her portfolio which is outside what her style is."
BT was picked to manage 75 per cent of the fund as it had good skills in the New Zealand and Australian market.
Gaynor says that besides continuance, there were issues of performance and style and having a better mix and consistency in the management.
He says the fund lost $1 in asset value over the past three years, and in the 12 month period to October 31 it beat the NZSE40 by only 1.4 per cent, even though about a third of its portfolio was invested in Australia.
Ring disputes the performance argument saying that NZIT has outperformed the index in six of the past seven quarters. He says the five quarters before those were a mixed bag of results.
He says Coronet wanted to make major changes to the fund when it took over from Colonial, however the manager wanted a slowly, slowly approach.
The other issue here is that the benchmark for performance and fees was the NZSE 40, however NZIT are now comparing the fund to the NZSE Smaller Companies Index and the ASX All Ords. To further complicate the equation Ring says the fund's NTA should be measured against the benchmark as opposed to the share price (the shares have recently traded at a discount of up to 15 per cent).
Gaynor says the telling point is that Coronet was never paid a performance bonus in all the time it advised NZIT.
Another point of contention has been the way the Australian portion of the fund was managed.
Coronet pushed for the mandate to be changed so that up to 35 per cent of NZIT could be invested in Australia, however it appears the parties, while agreeing to the Australian exposure, disagreed over style and stock selection.
Ring says no one likes to lose an investment mandate, however this parting of ways had been coming because relationships between Coronet and the board had been "frosty" for a while.
"Some mandates are tougher to run than others," he says.
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