The Australian shares version of Intech’s international High Opportunities Trust (HOT) has been seeded with $100 million from two existing clients and is expected to remain open to other investors for only a short period of time
The new fund, the Australian shares High Alpha Trust (HAT), was confirmed last week after being in development for several months. While HOT has about $900 million invested and is still open to new investors for the time being, Intech is expected to close HAT well before it reaches that size – probably between $600-700 million – because of more intense capacity concerns in the Australian market. HOT has been very successful in not only raising money but also its short-term performance. The fund, launched late in 2004, returned 20.4 per cent since inception, compared with the return of the MSCI World (ex-Australia) index of 16.2 per cent. Both HOT and HAT use managers of concentrated or benchmark-unaware portfolios. In HAT’s case, the starting lineup is Lazard, Quest, Herschel and Highbridge. Ron Liling, Intech’s chief investment officer, said the managers had been chosen to extract the greatest possible return given their individual characteristics and FUM capacities. They had not been blended because of style or market-cap or any other considerations to neutralise short-term volatility. For this reason, Liling said, HAT was not a fund for the faint hearted. It will have a tracking error of about 3-4 per cent, which compares with the average tracking error of 1.2 per cent in the Chant West survey of multi-manager Australian share funds. Multi-manager concentrated portfolios may prove more popular than single-manager concentrated offerings, in time, because they tend to diffuse some of the riskiness inherent in that investment strategy. The HAT managers will have a total share portfolio of about 60 stocks compared with about 150 for similar broad market multi-manager offerings. However, portfolios of concentrated managers also have duplications in their portfolios and investments between themselves which may cancel each other out.
Since taking over the top job at the $44 billion Funds SA more than a year ago, chief executive John Piteo has ushered in an investment function overhaul and wrapped up an important stage of the fund’s five-year data transformation program. It pledges to recentre around investment performance and more efficient processes, as the “missing piece” has been found in incoming CIO Con Michalakis.
Darcy SongJanuary 10, 2025
