The future of Alpha Investment Management is uncertain after AustralianSuper redeemed $345 million from the boutique in the rationalisation of its Australian equities portfolio, which according to Alpha’s CIO had in aggregate been delivering an ‘index-like’ portfolio with a tilt to cash.
Alpha holds enough capital to sustain itself for another two years and is consulting shareholders as it determines its future, Victor de Lorenzo, chief investment officer at the boutique, said.
“We’re well cashed-up and have enough resources for the next two years, but we need to weigh up how profitable it would be to do that in the current conditions, and how fair that would be to shareholders,” de Lorenzo said.
“You can have finances, but do shareholders want to risk those finances?”
The major shareholder in the business is embattled investment bank Babcock & Brown (B&B), which owns a 55 per cent stake. The remaining equity is owned by members of the current and former management of Alpha.
de Lorenzo said preliminary discussions about B&B’s exit from the firm had been held concerning the value of its equity holding for any potential sale.
He said that AustralianSuper’s redemption had weakened the value of the business’ equity. Alpha now manages $150 million from three clients.
In a telephone conversation a fortnight after cutting its active Australian equity manager list from 30 to 10, AustralianSuper explained to Alpha that it had not observed enough value-add to justify the fees and time commitment required for investments with a large number of active managers.
The portfolio of 30 managers, which the investment committee spent much of its time monitoring, had since inception paid away most of its gross outperformance of the ASX 200 in fees.
Looking at the aggregate holdings, the fund found that the portfolio’s biggest tilt against the index was a 3 per cent weighting to cash.
The second largest bet, a stock position, deviated from the benchmark by 1.2 per cent.
Overall, the portfolio had eight positions with a weight greater than 0.5 per cent away from the benchmark.
“It looked like a quasi-index fund with a bit of cash,” de Lorenzo said.
AustralianSuper did not respond to requests made by I&T News yesterday to confirm these numbers.
Hugh Giddy, managing director of Cannae Capital Partners, which lost a $34 million mandate in AustralianSuper’s shift to increase the beta exposure in its domestic equities portfolio, was told a similar story.