Investment Insights -
Global managers
To gain a globally diversified exposure to different asset classes, NZ Funds uses a combination of internally and externally managed strategies. NZ Funds manages assets in-house where we believe we have an advantage in doing so, and partners with global managers to invest the remainder of clients’ capital.
When we look for global diversity, a unique advantage we have is our ability to identify and access top performing global managers. We have over two decades of research on managers across numerous asset classes and geographies. This gives us a rich dataset from which we can select managers that we believe will give our clients the strongest risk-adjusted returns over the long term.
Our global manager selection process continually evolves. As part of our ongoing due diligence, we hold meetings with potential and existing managers throughout the year. Our schedule includes travelling to Asia, New York, and London, where many of the world’s leading managers are based. More recently, due to COVID-19, we have conducted our due diligence and meetings via Zoom. If anything, this has broadened our reach across the global investment landscape.
First, some definitions
A long-only investment manager generates superior returns by investing in shares that increase in value more than the share market.
Long/short is an investment strategy that seeks to take a long position in underpriced shares while selling short overpriced shares.
An alternative investment is a financial asset that does not fall into one of the conventional investment categories. Conventional categories include shares, bonds, and cash.
Introducing our global managers
MFS Investment Management
NZ Funds partnered with MFS in 2019. Based in the United States and founded in 1924, MFS is one of the oldest asset management companies in the world with US$430 billion in assets under management.
MFS’s strategy is to search for the best global ideas whether they are growth or value by investing in companies believed to have favourable growth prospects and attractive valuations.
The term ‘fundamental research’ gets thrown around the investment industry but MFS lives and breathes it. Their ideas originate from the research team who are structured across eight global sectors and working from nine global offices . Investment ideas emerge as analysts obtain and continuously assess company and industry information from contacts with company management, suppliers, competitors, consultants, industry conferences and brokers.
Suvretta Capital Management
Suvretta is arguably one of the world’s pre-eminent long/short investment managers today. A New York-based hedge fund with over US$4 billion under management, Suvretta was founded by Aaron Cowen, a former Portfolio Manager for George Soros, and former Chief Investment Officer of SAC Capital.
As one of Suvretta’s founding investors, NZ Funds’ clients have been invested since 2014. Suvretta’s investment strategy starts with investing in industries which benefit from secular growth or shorting industries in secular decline.
The firm strives to own great companies in solid industries and short companies which are in weak industries and/or are losing market share. Their investment philosophy also emphasises companies with management teams that are either good or bad stewards of capital.
Emerson Point Capital
Emerson Point was founded in October 2017 by emerging star Amir Mokari. Emerson Point is a long/short manager with a primary focus on three core sectors: consumer, TMT (telecoms, media, technology), and business services.
The three core sectors offer compelling long and short opportunities, given the tectonic shifts caused by the rise of the internet, demographic evolution (aging of millennials into peak spending years), and changing consumer behaviours due to technological innovations.
Emerson Point’s use of checklists instils process discipline, encourages thoroughness, and helps minimise unforced errors.
They also believe that diversification can often dilute returns. Rather than spread capital and human resources across a large number of investments, Emerson Point generally concentrates a substantial portion of a portfolio in a small number of investments.
Universa
Universa is NZ Funds’ downside mitigation manager and is considered an alternative manager. Established by Mark Spitznagel in 2008, Universa is based on Nassim Taleb’s work which was later to become known as the ‘Black Swan Theory’.
Universa expect to experience small losses but believe financial markets are inherently more unstable so its portfolio will benefit from large (unforecastable) movements in markets, as was the case in March 2020.
Global manager positioning
Global managers make up approximately 40% of our global share market exposure. As we have discussed in previous market updates, we have increased our active management over the past 12 months. We have done this by increasing clients’ exposure to the global managers mentioned above.
We anticipate increased volatility in share markets and the end of the ‘all boats rise with a rising tide’ share market. We believe there is value in being more selective in which companies, sectors, and geographies we invest and our global managers are well positioned to make these capital allocation decisions.
NZ Funds are nearing completion of due diligence to add a further global manager to our suite of managers. We look forward to introducing this manager to our clients soon.
When we look for global diversity, a unique advantage we have is our ability to identify and access top performing global managers. We have over two decades of research on managers across numerous asset classes and geographies. This gives us a rich dataset from which we can select managers that we believe will give our clients the strongest risk-adjusted returns over the long term.
Our global manager selection process continually evolves. As part of our ongoing due diligence, we hold meetings with potential and existing managers throughout the year. Our schedule includes travelling to Asia, New York, and London, where many of the world’s leading managers are based. More recently, due to COVID-19, we have conducted our due diligence and meetings via Zoom. If anything, this has broadened our reach across the global investment landscape.
First, some definitions
A long-only investment manager generates superior returns by investing in shares that increase in value more than the share market.
Long/short is an investment strategy that seeks to take a long position in underpriced shares while selling short overpriced shares.
An alternative investment is a financial asset that does not fall into one of the conventional investment categories. Conventional categories include shares, bonds, and cash.
Introducing our global managers
MFS Investment Management
NZ Funds partnered with MFS in 2019. Based in the United States and founded in 1924, MFS is one of the oldest asset management companies in the world with US$430 billion in assets under management.
MFS’s strategy is to search for the best global ideas whether they are growth or value by investing in companies believed to have favourable growth prospects and attractive valuations.
The term ‘fundamental research’ gets thrown around the investment industry but MFS lives and breathes it. Their ideas originate from the research team who are structured across eight global sectors and working from nine global offices . Investment ideas emerge as analysts obtain and continuously assess company and industry information from contacts with company management, suppliers, competitors, consultants, industry conferences and brokers.
Suvretta Capital Management
Suvretta is arguably one of the world’s pre-eminent long/short investment managers today. A New York-based hedge fund with over US$4 billion under management, Suvretta was founded by Aaron Cowen, a former Portfolio Manager for George Soros, and former Chief Investment Officer of SAC Capital.
As one of Suvretta’s founding investors, NZ Funds’ clients have been invested since 2014. Suvretta’s investment strategy starts with investing in industries which benefit from secular growth or shorting industries in secular decline.
The firm strives to own great companies in solid industries and short companies which are in weak industries and/or are losing market share. Their investment philosophy also emphasises companies with management teams that are either good or bad stewards of capital.
Emerson Point Capital
Emerson Point was founded in October 2017 by emerging star Amir Mokari. Emerson Point is a long/short manager with a primary focus on three core sectors: consumer, TMT (telecoms, media, technology), and business services.
The three core sectors offer compelling long and short opportunities, given the tectonic shifts caused by the rise of the internet, demographic evolution (aging of millennials into peak spending years), and changing consumer behaviours due to technological innovations.
Emerson Point’s use of checklists instils process discipline, encourages thoroughness, and helps minimise unforced errors.
They also believe that diversification can often dilute returns. Rather than spread capital and human resources across a large number of investments, Emerson Point generally concentrates a substantial portion of a portfolio in a small number of investments.
Universa
Universa is NZ Funds’ downside mitigation manager and is considered an alternative manager. Established by Mark Spitznagel in 2008, Universa is based on Nassim Taleb’s work which was later to become known as the ‘Black Swan Theory’.
Universa expect to experience small losses but believe financial markets are inherently more unstable so its portfolio will benefit from large (unforecastable) movements in markets, as was the case in March 2020.
Global manager positioning
Global managers make up approximately 40% of our global share market exposure. As we have discussed in previous market updates, we have increased our active management over the past 12 months. We have done this by increasing clients’ exposure to the global managers mentioned above.
We anticipate increased volatility in share markets and the end of the ‘all boats rise with a rising tide’ share market. We believe there is value in being more selective in which companies, sectors, and geographies we invest and our global managers are well positioned to make these capital allocation decisions.
NZ Funds are nearing completion of due diligence to add a further global manager to our suite of managers. We look forward to introducing this manager to our clients soon.
Source: Global manager return data, Bloomberg, NZ Funds research.
For more information please contact NZ Funds.
This document has been provided for information purposes only. The content of this document is not intended as a substitute for specific professional advice on investments, financial planning or any other matter.
While the information provided in this document is stated accurately to the best of our knowledge and belief, New Zealand Funds Management Limited, its directors, employees and related parties accept no liability or responsibility for any loss, damage, claim or expense suffered or incurred by any party as a result of reliance on the information provided and opinions expressed except as required by law.
For more information please contact NZ Funds.
This document has been provided for information purposes only. The content of this document is not intended as a substitute for specific professional advice on investments, financial planning or any other matter.
While the information provided in this document is stated accurately to the best of our knowledge and belief, New Zealand Funds Management Limited, its directors, employees and related parties accept no liability or responsibility for any loss, damage, claim or expense suffered or incurred by any party as a result of reliance on the information provided and opinions expressed except as required by law.
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James Grigor is Chief Investment Officer for New Zealand Funds Management Limited (NZ Funds) and a member of the NZ Funds KiwiSaver Scheme. James' comments are of a general nature, and he is not responsible for any loss that any reader may suffer from following it.
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