Capital International, part of the Capital Group is beefing up its presence in Australia with the opening of a representative office late last year and the launch of its Emerging Markets Total Opportunities Fund for both institutional and retail investors.

Paul Hennessy, a former Macquarie banker who was appointed Capital’s Australian head last year, says the US-based firm has launched its Emerging Markets Total Opportunity Fund to the local market as investors in Australia seek a smoother ride in emerging markets in the post-global financial crisis environment.

The portfolio, which has a live track record going back to 2007, seeks to capture emerging-market growth opportunities while dampening volatility.

“Emerging markets are a great opportunity for investors and yet they have been volatile,” says Hennessy.

“During the global financial crisis a lot of investors were down 80 per cent on their investment, so what ETOP aims to do is create an equity-like return with lower volatility.”

Hennessy says Capital’s ETOP fund takes a “totally bottom-up” approach to investment, looking at individual securities and then modeling their impact on the portfolio through a volatility-measurement tool.

“We don’t do top-down asset allocation,” he says.

“We won’t say we like China over Brazil, but we will say where is the best risk-return security across the entire capital spectrum and we mean sovereign debt, corporate debt or equities across both emerging and frontier markets.”

Hennessy says the fund is aiming for returns of 10 per cent at 12 per cent volatility, which is half that of equity markets. Including the “paper portfolio”, it has achieved returns of 9.6 per cent since inception in 2007.

Capital is aiming to market the fund to institutional and retail investors and is speaking with wealth-management players about having it listed on retail platforms.

Leave a comment