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Another Australian manager crosses the ditch

A fund set up by two former Hunter Hall managers is crossing the Tasman and coming to New Zealand. Jack Lowenstein, of Morphic Asset Management, provides some thoughts on international markets.

Thursday, May 30th 2013, 7:21AM 9 Comments

by Susan Edmunds

New Zealand and Australian investors are not investing enough in global equities, says Jack Lowenstein, of Morphic Asset Management.

He says research has shown that independent investors have less than 5% of all their assets in global equities, compared to groups such as superannuation funds, which typically have about 30%.

While that has been a good strategy for private investors over recent years, as the Australian and New Zealand equity markets outperformed their global counterparts, Lowenstein said that would change and investors could be hurt by their underexposure to global investments.



Morphic has this week made its global equities fund available to New Zealand investors. It has been operating for Australian investors for the past 10 months. It has reported returns so far of 20.43% compared to the MSCI All Countries Total Return Index of 20.56%.

Lowenstein said investors were wary of managed funds because, during the global financial crisis, private investors who were investing directly did much better than managed funds that had seemingly more sophisticated strategies.

“That has made investors a bit negative about managed funds but I don’t think [investing in global equities] is something that can be done as easily. There are market access issues and much higher risk.”

He said the end of the Chinese boom would slow the performance of many Australasian shares. “I think we’ve seen the high water mark for resource prices.”

Much of the strength of New Zealand and Australian equities was also down to the strength of the countries’ currencies, he said, which would eventually subside. “I think global equities will outperform Australian equities again.”

MGOF invests in global equities using a long bias long short-short strategy. Stocks in the portfolio at the moment include the Manila Water Company, a Japanese karaoke equipment manufacturer and a US house building company.

Morphic isn’t the only firm trying to tempt Kiwi investors into global markets. BNP Paribas Investment Partners this week announced the launch of the Carnegie WorldWide Equity Trust, which provides Australian wholesale and New Zealand habitual investors with access to Carnegie Asset Management’s global equity strategy.

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Comments from our readers

On 30 May 2013 at 7:49 am Barrington Smythe said:
Whilst it is nice to see new investment options available for NZ investors, might I humbly suggest that until NZ fund managers can market their funds in Australia using an NZ investment statement (which they can't currently), advisers should refuse to use Aussie funds that can simply walk in here and market funds on an Aussie PDS.

If the Government can't solve this, maybe we can by voting with our clients' dollars.
On 30 May 2013 at 9:56 am John Berry said:
@Barrington Smythe - thanks for raising this. While we welcome plenty of product choice for NZ investors and advisers, the regulator did drop the ball agreeing Trans-Tasman "mutual recognition" of offer documents. Aussie managers are free to market in NZ but we can't in Australia - there is no mutuality. They don't want us exporting apples, or funds! (but we'll happily import theirs...)

I am also grumpy about the FMA charging a levy to NZ boutique fund managers (this year we will pay $20,000) to fund NZ regulatory oversight without also charging Aussie managers selling funds under a PDS. At the moment they benefit from the regulatory regime in NZ but make local managers pay for it....
On 30 May 2013 at 10:10 am Kimble said:
Put the clients money where it is best positioned.

You don't have any right to direct it in other way.

You're there to protect your clients interests, not your suppliers.
On 30 May 2013 at 10:52 am John Berry said:
Kimble - to be clear my comments were directed at shortcomings in the regulatory environment. I don't for a second encourage advisers to do anything other than choose the best product fit for their clients.
On 30 May 2013 at 9:08 pm Collin said:
Surely this means greater choice for New Zealand investors and possibly more employment opportunities in New Zealand. Saying that they shouldn't participate or be considered (due to a regulatory grievance) is short-sighted. Shouldn't we embrace new players in the market?
On 30 May 2013 at 10:25 pm Anthony Edmonds said:
John etc. You will be interested when you read my up-coming article in Asset magazine.

The NZ Government provides tax incentives to Kiwi mum and dad investors to buy offshore manufactured global share funds (over NZ manufactured funds).

Find me another NZ industry where the NZ Government is providing tax incentives to Australian manufacturers.
On 31 May 2013 at 8:25 am Clayton Coplestone said:
As NZ's largest promoter of offshore investment capabilities, I agree entirely with John: the field must be level.

As to NZ managers promoting their trade in Australia: The Aussie marketplace is overflowing with product, with a very slim chance of Kiwi product manufacturers getting a look in.
On 31 May 2013 at 8:58 am R1 said:
Perhaps Aussie offer documents are subjected to higher standards of disclosure? If this is the case they should be preferred over NZ offers and the local providers should be upping there game in this regard. NZ has a relatively poor rating internationally on matters of disclosure according to the recent NZ Herald article. Just a thought.
On 31 May 2013 at 10:39 am John Berry said:
R1 - good question. NZ agreed to mutual recognition of offer documents with the intention of product freely flowing both ways across the Tasman. As part of this Australia and NZ accept each others offer docs - Australia don't see our disclosure as inferior. But what the Securities Commission didn't realise when they signed up is that NZ also needed a waiver from Australian licensing requirements (as they have done for Singapore and others). So Australia accepted NZ offer documents but knew as a practical matter they still wouldn't have to accept NZ product. I think it is just a case of NZ not really realising the full implications of the deal... With fund manager licensing on the 2/3 year horizon in NZ we have an opportunity to revisit this with Australia.

Clayton, it is encouraging that that Australian managers agree with the level playing field. Can I please ask all Aussie managers to disclose how much they are raising in the NZ market from NZ investors (NZ managers disclose this) - this is useful information for NZ investors and advisers.

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