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St Laurence says: forget fees

In an industry where innovation is a reasonable measure of business success, Wellington investment bank St Laurence has proved that it has more than its fair share.

Wednesday, August 20th 2003, 1:53PM

St Laurence has just launched a new investment fund that gives Mr and Mrs Investor peace of mind about management fees – none will be paid until the fund provides a specified base return. The concept, called Number One Portfolio Trust, is rare in the managed funds industry, reserved usually for higher risk hedge funds.

St Laurence managing director Kevin Podmore says Number One Portfolio Trust provides a highly competitive and tax-efficient return for investors, while also ensuring that they are exempt from management fees unless the investment performs to a specified level. Number One offers five separate funds, each with a different base return depending on its own risk profile. For example, the High Yield Fund has an annual base return of 8% tax paid, while at the other end of the scale, the Cash Deposit Fund has an annual rate of 4% tax paid.

"We would hope that as the funds become popular, investors will focus more on the margin that could be achieved above the base return," Podmore says. "We're optimistic that [this] can be achieved in all the funds. The base return is there to protect investors. If we can't achieve the base return, then no management fee is paid. In effect, we are saying to our investors that we are putting their interests first, not the other way round. It's fair to say that there aren't a lot of products and services in the marketplace that have this philosophy, but we're prepared to back our judgment and put our fees on the line."

“Number One is likely to appeal to the large array of Kiwis who have feared losing their shirts while investment managers have continued to don new suits. Many investors' portfolios have diminished in value because of international factors, and fund managers have still collected their fees.”

Returns for Number One investors are in the form of tax paid bonus units, credited quarterly. The funds will be managed and controlled in Australia, reducing the amount of tax payable by New Zealand investors. Podmore says that given the tax-free nature of the bonus units, Number One is likely to appeal to a broad range of investors either as an addition or alternative to existing investments. He expects it to achieve funds under management of about $60 million in its first year.

Breathing life back into historic market

Meantime, the previously struggling Victoria Park Market in Auckland has had a new lease of life after St Laurence injected some much needed innovative thinking into the market's management. The market has just been sold after attracting substantial local and international interest from prospective buyers. The sale price of $14.1 million will result in investors receiving about 0.83c per unit. When St Laurence took over management of the syndicated property fund that owns the historic market, in early 2002, the value of the units was 0.16c and unitholders had not received any income distributions since the mid 1990s.

St Laurence asset manager John Crone says Victoria Park Market fund’s turnaround was achieved by lifting the rental yield through better use of space and reducing vacancies. "We also took a good look at the retail mix and placed weaker tenants in better positions alongside stronger ones," he says. "A sound victory at the Land Valuation Tribunal also helped, which resulted in reduced rates." St Laurence's bulk buying power also reduced power, water, security and cleaning costs, and income was boosted from signage and car parking. Revenue last year was close to $2.6 million.

St Laurence was formed in 1994, quickly establishing itself as one of New Zealand's leading innovators in investment banking. It specialises in the promotion and management of investments, including property bond issues, fixed interest debenture stock investments and syndicated property investments. It has more than $550 million in funds under management and more than 12,000 investors. Its head office is in Wellington, with other offices in Auckland, Hamilton and Sydney.

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