K2 Asset Management co-founder Mark Newman says too many of the large superannuation funds have focused on minimising fees and are excluding funds that are generating attractive after-fee returns.

“As a Victorian-based fund manager we have had no support,” says Newman. “I can understand that after one year, but after 12 years with a first-class track record, that’s a little frustrating.”

K2, formed in 1999, managed $897.7 million as of September 1. About 30 per cent of its investors are institutions.

The Melbourne-based firm’s $470.7 million Australian fund has made net annual returns of 13.3 per cent a year over a dozen years, compared with the 8 per cent annual return of the All Ordinaries accumulation index.

K2’s $151.4 million Asia ex-Japan fund is up 11.8 per cent per annum over 12 years compared to the 4.8 per cent rise in the MSCI Asia-Pacific ex-Japan Index. The $234.1 million international fund has had net annual returns of 11.5 per cent over 6.5 years.

K2 also has $41.9 million invested in other funds.

“Most institutions focus on fees rather than after-fee returns,” says Newman.

He says K2 could become a “much bigger business”. But he says he does not want to be a $20 billion fund.

K2 listed on the Australian Securities Exchange in November 2007 at $1.05 a share. The stock is trading at about 20 per cent below its IPO price, adjusted for dividends.

“Financial stocks haven’t done well post-GFC,” says Newman.

In the two months to September 1, the Australian fund has fallen 4 per cent. The Asian fund is down 7.3 per cent and the international fund has slid 8.7 per cent.

Conexus Financial, the publisher of I&T News, is hosting a conference on hedge funds in Melbourne on September 20. Click here for more information


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