ING general manager marketing Steven Giannolous says the company chose to go for an absolute return fund it fits with how investors think. Rather than measuring returns against a benchmark, such as the NZX50, people measure returns against what they would get if their money was placed in the bank.
While the fund has an absolute return focus its benchmark is the cash rate plus 5%.
The management fee has been reduced from the 1.5% - which is the norm for active share funds – to 1.3%, however there is a performance element.
If the manager exceeds the benchmark it gets 10% of the outperformance above the benchmark.
The fund will invest in listed shares in Australia and New Zealand or companies which are intending to list, however it is likely to have a bias towards New Zealand.
It will not own stocks for index risk management, that is it won’t pay any attention to share market indices. If the managers can’t find anything compelling to invest in its default position is cash. While the fund has an absolute return focus it is not allowed to short-sell stocks, use leverage or adopt alternative investment strategies.
It sits alongside ING’s “traditional” Australasian share fund which is actively managed and does make investment decisions with its benchmark index in mind.
Giannolous the new fund will be more concentrated and will invest in the “overweight” positions of the other fund. That is it will only hold the companies which ING is already invested in and it will only invest in those companies which ING’s managers Shane Solly and Amanda Smith have the most confidence in.
Giannolous says ING considered making the fund an Australian Unit Trust, but chose to go for a New Zealand domicile because of planned changes to remove the tax advantages of the AUT structure.
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