Equity Trustees (EQT) has appointed a Sydney hedge fund to manage the $150 million locked in its High Income Fund, formerly managed by Lehman Brothers Asset Management until it abruptly closed Australian operations in May.
Under the arrangement the hedge fund, market-neutral manager TechInvest, has hired income and high yield debt manager Spectrum Asset Management to conduct analysis of securities in the portfolio and recommend exit opportunities.
Harvey Kalman, head of funds management at EQT, said the appointment was made to change the underlying manager and was governed by the same rules that apply to its arrangements as responsible entity for other managers.
“This is not just a sell-down,” he said.
Rick Steele, chief executive officer of TechInvest and chair of the management board that decides whether to sell or hold the assets, said that approximately $20 million had been realised since the arrangement became effective in August.
“We’re not doing any forced-selling…We sold when the market price [for assets] has been higher than what we expected,” Steele said.
He said that full realisation of the portfolio, which is invested primarily in hybrid securities but also in corporate debt, property securities and collateralised debt obligations, would take “some years” since “investors want to optimise the value of their investments”.
According to the EQT High Income Fund product disclosure statement, approximately 44 per cent of the portfolio was invested in hybrid securities and almost 42 per cent of its total assets were unrated.
“It’s the first experience we’ve had of a manager resigning and having assets still to run that couldn’t be liquidated,” Kalman said. “We’ve had other managers that have closed down and sold assets, but it’s the first time we’ve had to close and not give investments back relatively quickly because of the state of the markets.”
In a recent note to unitholders of the fund, EQT wrote the sale of portfolio assets were made at “close to their original cost” and the fund had not incurred any net capital loss as a result of the sales.
Unitholders had received a total return of 15 cents per unit since the fund was closed on May 19, the note stated.
Meanwhile TechInvest recruited a fundamental equities analyst from DVA Capital, an Asian equities boutique run by Kerry Series before until he closed it to join AMP Capital Investors, to its team last month.
Anshu Sharma joined the fund after one year at DVA Capital. Steele said his analytical capabilities and knowledge of the Asian markets, including India, were valuable.