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New NZ-based equity funds to hit market

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Richard Stubbs

15 November, 2013 - A new joint venture, involving the ex-Tower Investments equity team, is launching two New Zealand funds targeting Trans-Tasman equities.

Castle Point will launch the Castle Point Ranger Fund and Castle Point Trans-Tasman Fund to meet growing New Zealand demand for diversified investment opportunities as KiwiSaver schemes expand and capital markets deepen.

The new boutique fund manager is headed by Richard Stubbs and Stephen Bennie and includes equity analysts, Jamie Young and Gordon Sims. This represents the entire equity team from Tower who have a top-quartile three-year track record recognised by this year’s finalist placing in the INFINZ Fund Manager of the Year awards.

Castle Point is backed by an equity stake taken by the principals of NZAM, the 22-year Absolute Returns global investment specialists. Capital backing is provided by RAW Capital Partners, a Guernsey-based asset manager whose principals include Richard Avery Wright and Dennis Stoller.

Stubbs, Bennie, Young and Sims were together for three years at Tower Investments, before it was bought in February by Fisher Funds for $79 million.

“There is a lot of talent in this team, it is great that we have been able to keep it together.” comments co-founder, Stubbs. “Castle Point has the same team, the same processes and the same philosophy, based around significant long term opportunities."

The Ranger Fund, which will be launched first, is an actively managed portfolio of New Zealand and Australian listed companies selected by using quantitative screening and backed by an intensive research process. Hedging strategies will be employed during periods of market stress.

“Our aim is to preserve our investors’ capital by minimising downside risk during volatile markets, while still delivering equity-like returns to our investors,” says Stubbs.

The Trans-Tasman Fund is a diversified portfolio of New Zealand and Australian companies and will be benchmarked against the NZX50.

NZAM principal, Alan McChesney, says that as an investor in talented managers “we’ve applied the same due diligence on the Castle Point team that we would for managing our global network of managers on behalf of clients.

“While our principals, not the business, have taken an equity stake – it remains business as usual for NZAM clients. Their funds won’t be invested in Castle Point because we primarily invest in global markets beyond New Zealand and Australia.

“Our support involves providing a full-service infrastructure backing, including compliance, accounting, anti-money laundering, settlements, auditing and reporting,” says McChesney.

“Castle Point is a top-quartile, extremely talented team with a proven track record; and this will allow them to focus their time on investing, not running a business," he added 

Co-founder Bennie says, “Today is the right place, right time to launch two new funds in the New Zealand market”.

“There’s an overdue renaissance in the local share market underway, there are a good number of new listings, creating a great deal more depth and breadth,” he continues. “Capital inflows are going to increase and that will buoy the current listings and encourage more IPOs to access that capital – we’ve got a genuine bow wave coming on.”

One area of deficiency in the New Zealand market, however, was in asset management, both in terms of the number of existing managers and their remaining capacity for new business. A recent Melville Jessup Weaver survey identified only 11 managers of Australasian equities, while a Mercer survey highlighted the issues that managers face when they reach capacity.

One billion dollars in funds under management is considered by the market to be the point where Funds can become too big to operate effectively and efficiently because their trades become too influential on share prices.

“New Zealand is actually under-serviced in asset management and we estimate that $400-$700 million will be flowing into New Zealand domiciled equity funds each year from our KiwiSaver schemes,” says Bennie. “That money simply cannot keep going to just the existing players.”

Chris Douglas, Co-Head of Fund Research at Morningstar welcomes the establishment of Castle Point.

“KiwiSaver has changed the local funds management landscape. Our expanding local capital markets warrants a healthy level of competition among a diverse pool of quality investment managers. New entrants that expand the diversity of domestic investment management is certainly a welcome development, as it leads to more choice for investors and more focused attention for their money. This has to be a good thing for investment outcomes and for our local market,” he said.

ENDS

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