MoneyTalks: When a volatile market starts to list, these listed fund managers sail with an upright keel
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MoneyTalks is our regular drill down into what stocks investors are looking at right now. Recorded live and commercial free in front of an unpaid studio audience we dragged off the street, Stockhead puts the hard word on our experts to find out what’s hot, what’s not, and what’s worth sticking your neck out for in these uncertain and slightly confusing times.
Today we’re thrilled to be joined by Drew Meredith, partner and financial advisor at Wattle Partners.
Stockhead: Drew Meredith, welcome to the show!
Drew: I thought this was just for print.
Stockhead: Haha. Now Drew. It’s been a torrid time for investors in Australia and around the world. Volatility has picked up significantly, with the threat of higher interest rates seeing both share and bond markets selling off heavily.
The question on our live audience’s lips right now is a simple one:
Drew: It’s a pleasure to be here. Well, Mr Stockhead, few companies on the ASX have been harder hit than global and domestic fund managers, or those managing capital on behalf of others.
While the sharemarket and those trading on a daily basis are quite skittish, the majority of investors within a lot of popular managed funds are more likely to have a buy and hold approach.
Combine this with the fact that many managed funds that have been held for a long period of time and thus have unrealised capital gains that would increase the cost of changing strategies. This extends to the cost of transacting including buy-sell spreads.
The sharemarket is always much quicker to price in the short to medium-term but has little in the way of imagination to consider how the world will look 12 or 18 months from now. Hence the hope of a recession sooner-rather-than-later on the assumption that it would allow the market to rally.
Among the hardest hit sectors in Australia at the moment is in funds management, which is offering quite a few long-term opportunities.
GQG is likely the standout, having only listed in 2021 and falling close to 30 per cent in the last few months on sectoral valuation concerns. The group now has over $100 billion in assets under management and their underlying global equity fund is the number 2 performing strategy in 2022, behind only PM Capital.
The performance has been achieved through true active management and prescient switch out of technology and into energy and utilities early this year. Interesting, the fees charged by GQG are among the lowest in the industry.
Not much more can be said about Magellan other than that the last 12 months has been disastrous.
Assets under management have fallen to just over $60 billion after the loss of a number of major contracts, which interestingly went to low-cost, passive investors before the crash.
There’s little doubt that sentiment towards the company is highly negative, but there are signs that the company may well be making an overdue adjustment to the more unique operating conditions we are in today.
The reliance on a single, talismanic leader was great in building a business, but with a growing range of global equity managers available to investors, drawing on the experience of larger teams of analysts will be key to long-term performance.
Magellan’s focus on quality along with its still strong brand and dividend yield suggest it may be a value opportunity for those with patience.
AEF is the longest standing ethical investment manager in Australia, having been operating for several decades. They have a strong consumer-driven strategy for their superannuation fund and inflows remain strong, despite the recent weak performance in technology and healthcare sectors that dominate more sustainable investment strategies.
The share price has fallen significantly due to short-term performance, yet it remains difficult to see a long-term future for the energy and commodity companies that are driving benchmark performances. More importantly, the Federal Election showed a groundswell of interest and demand for more action on climate, which bodes well for investors continuing to put their money where their mouth is and ensure their capital is invested in line with their values.
So PNI is not a fund manager per se, but a distributor of fund managers including Antipodes, Coolabah Capital, Firetrail and Hyperion among others.
The company has been hit quite heavily on valuation concerns despite the fact that the underlying managers are broadly seeing inflows and the stable of investment strategies continues to grow as the group essentially aims to ‘gather assets’. With ownership stakes in managers spanning almost every asset class the strategy offers a diverse exposure to multiple types of fund managers.
The views, information, or opinions expressed in the interviews in this article, er show, are solely those of the interviewees and do not represent the views of Stockhead.
Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.