Record growth sees NZ-based responsible global bond fund at nearly $500 million in half-year

In a burst of extraordinary growth, the NZ-domiciled Hunter Global Fixed Interest Fund has almost half a billion dollars under management less than six months after launching.

Tony Hildyard, the NZ investment industry veteran leading the Hunter Investments, said the rapid take-up of the Global Fixed Interest Fund had exceeded even his most optimistic expectations.

“We initially targeted $200 million as a minimum to make the fund viable, and thought perhaps there was demand in the current year for up to $300 million,” Hildyard said. “But we’ve been overwhelmed by the immediate investor support – both retail and institutional - for the fund, which validates our decision to create a quality global bond solution tailored explicitly for NZ clients.”

The Hunter Global Fixed Interest Fund taps into the flagship international bond strategy managed by the world’s largest fixed income manager, PIMCO. Uniquely, however, the Hunter Fund directly holds the underlying assets in a portfolio investment entity (PIE), which is tax-effective for NZ investors compared to offshore-domiciled funds.

“We specifically designed the fund to avoid any hidden ‘in fund’ costs or ‘tax leakage’ that could occur where a NZ fund invests into a larger global pool,” Hildyard said. “Instead, our fund owns the underlying assets directly and this also provides higher levels of transparency and compliance checking while allowing us a few judicious investment constraints.”

He said those ‘constraints’ cover a raft of responsible investment screens that NZ investors increasingly see as bottom-line issues.

Specifically, the Hunter fund does not invest in fixed income instruments offered by companies involved in:

• Cluster munitions manufacturing;

• Armaments producers (if this is their primary business); and,

• Tobacco.

“The fund will also not invest in companies whose whole or primary business is the exploration, extraction, refining or processing of fossil fuels,” Hildyard said. “In addition, the fund will not invest in any utility that primarily burns fossil fuels.”

Furthermore, he said PIMCO itself adopts stringent responsible investment strategies in constructing the underlying portfolio.

Despite the exclusions, Hildyard said the Hunter fund offers a broadly diversified global fixed income exposure. The Fund currently holds over 600 individual exposures.

As an active manager PIMCO has an enviable record of adding value above index
returns even in the current low-interest rate environment.

“Global fixed income lends itself to active management and PIMCO has done a sterling job for our investors,” Hildyard said.

And while interest rates are expected to rise – potentially hitting bond returns – PIMCO forecasts a very gradual increase, he said.

“For bond investors, this is good news as slowly rising rates actually enhances returns as we get to invest cash flows and maturities at steadily higher levels,” Hildyard said. “That is the beauty of bonds, even if rates rise sharply, providing you avoid a default, you still get your principal and interest repaid and can then invest again at a higher level.”

The Hunter fund is open to wholesale investors and to retail clients through financial adviser-intermediated platforms Aegis and FNZ as well as directly via the innovative online services, InvestNow.

The Hunter Global Fixed Interest Fund is formally offered by Wellington-based licensed managed investment scheme (MIS) firm, Implemented Investment Solutions. MIS managers are subject to the stringent disclosure conditions of the Financial Markets Conduct Act, which is regulated by the Financial Markets Authority (FMA).

Additionally, the Hunter fund features Public Trust as supervisor (a role previously known as trustee) with custodian, BNP Paribas, providing independent oversight of all assets and transactions.

Hildyard has a long and distinguished career in the NZ funds industry including a long stint as head of Tower Investments and as PIMCO representative in the local market.

ENDS