Invesco seeks parental help to rescue Australian equities

Invesco Australia has sought the assistance of its international parent’s investment teams in Europe and the US to help rebuild the Australian large cap fund which was decimated after its top two managers departed in March.

The Melbourne-based investment firm has solicited Invesco’s global structured products team – some 50 people based in Frankfurt and Boston – to build a country-specific portfolio for Australia. The global team already runs country-specific portfolios for other countries as well as its global products. Invesco Australia chief executive, Mick O’Brien, said the global team is in the throes of back-testing its data and investment models to determine whether they would produce reasonable investment performance. Logistically, it is a huge task that wouldn’t be done if the firm weren’t confident it would produce results, he said. Backtesting performance means getting all company accounts, price movements, brokers earnings estimates and the like for the last 20 years for the top 500 Australian stocks (the global teams have had to expand their previous 120-stock Australian coverage) and running the data back through their investment models. “We see which models work, which ones don’t work, make some changes, and basically determine which models will be more predictive for the Australian market,” O’Brien said. The process has already been running for five months and it will run several months longer before a final decision is made. In parallel to this, Invesco Australia has been sniffing out acquisition opportunities, so it can replenish its domestic equities capability from a local base. No offer has yet been made but talks with a few groups have advanced, O’Brien said. An acquisition will be pursued regardless of whether the global products team is successful in opening an Australia-only fund or not. The two investment teams would run separate portfolios. “I think there’s a place in the market to have multiple investment capabilities given Australian equities is [this country’s] biggest asset class,” O’Brien said. He compared it to having two horses running in a race rather than one – you’ve got more chance of coming first. Invesco’s Australia large cap fund was around $2.5 billion in March before its top two large cap equities personnel, Rohan Walsh and Luke Sinclair, departed to start Bell Potter-backed boutique Karara Capital. The fund dwindled to the tens of millions within months, and has been steady with $60 million under management for some months, according to O’Brien.