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Defensive fund gaining traction in New Zealand

Australian-based fund manager Perennial Investment Partners says its new fund has hit a note with advisers in New Zealand and is getting good flows.

Thursday, October 2nd 2014, 6:29AM

Perennial Head of Retail Funds, Brian Thomas, says its Value Wealth Defender Australian Shares Trust has already attracted $6 million in funds from New Zealand investors.

He says the fund offers "a unique way to manage the downside risk in investing in Aussie Shares."

“We’ve been working on the concept of a new way to cushion the downside but it was only when we were able to employ the services of a very experienced risk manager and derivatives expert, Dan Bosscher that the concept came together,” he said

“In many ways we can thank the new regulations on investment banks globally and their underlying capital issues post the GFC to ensure that experienced risk managers like Dan now see a great future with more traditional asset management firms like Perennial.”

The product uses a dynamic protection approach to cushion any major falls – for instance if the market fell 20% overnight the fund currently has protection strategies, currently through put options to ensure that the fund would only fall 10% in this scenario but the risk management doesn’t just stop there. “We use a dynamic and flexible strategies to protect the portfolio even after a one-off shock,” Thomas said.

He says the key differences with other products is the benchmark used.

“We are targeting the full ASX300 accumulation index with this product whereas many other products that also focus on protecting the downside tend to have cash or cash plus benchmarks. We see this as investment nirvana – getting the great returns that historically are available from Australian shares but also focussing on cushioning the inevitable big downturns.”

In terms of New Zealand investors the fund has already proved popular for a new strategy raising around $6 million since the product launch in June.

Thomas says that Investment Trends research shows that 91% of Australian advisers expect at least two major downturns (more than 20% falls in a short period) in the next 20 years.

He says that during the GFC most long-only managers could only go to a small amount of cash.

Quick product summary:

  • Provides dynamic protection with the aim to cushion the effect of any future large market falls
  • Targets the full ASX300 Accumulation Index (rather than say a cash or cash plus benchmark)
  • Daily unit pricing and liquidity
  • Management Fee under 1% p.a
  • Already rated “Recommended” by Zenith

 

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