Three weeks after the 6.3 earthquake that struck Christchurch, I flew to Auckland on the North Island of New Zealand for our Opalesque 2011 New Zealand Roundtable. Four of the participants joined the Roundtable from Christchurch on the Southern Island. One of them was still affected from an injury, while another one was currently living with his family in a tent in his garden.
However, the spirit at our reunion was up-beat, as a lot of fund managers have done extremely well in New Zealand and were able to outperform the majority of their global peers, including investment legend Warren Buffett, over the last 12 months.
Independent thinking has always been a strength of the Kiwis. Being in New Zealand allows those managers to make “very good, very dispassionate decisions” and offer both domestic and international investors attractive options. With a return of over 16.5% per annum since inception after fees, the Ernst and Young NZARA Absolute Return Index has outperformed the HFRX Global Hedge Fund Index, the Newedge CTA Index, MSCI World and the NZX 50 Gross by a wide margin.
Pointing to the extreme volatility in the markets, Charles Drace from Socrates Funds Management warns that “volatility does not suit traditional strategies but rather alternative strategies”, and that “most of the people in the alternative market in New Zealand are probably better able to cope with that volatility than Wall Street or London type managers.”
New Zealand based managers benefit from a highly skilled workforce with very low levels of staff turnover. An extremely low cost base allows them to start out and maintain their business also with little AUM. But the country, the government and some entrepreneurs have also higher aspirations to establish New Zealand as a back/middle office infrastructure provider to some parts of the financial services industry. More, consultancy firm Oliver Wyman suggested in a report to the government to develop the framework for a true Asian funds domicile, as at this point “Asian” funds are really domiciled in Luxembourg, Dublin, Cayman Islands or other similar domiciles outside of the region.
The government has already put a very tax efficient and cost effective New Zealand Limited Partnership structure in place that can be used for non-New Zealand investors investing outside of New Zealand as a pass-through entity. Such a LP can be registered for $250 only which allows launching a structure quickly with a relatively small capacity, whereas “with a Cayman fund you do not get any change out of $50,000”, says Kenji Steven from NZ Capital Strategies.
In this Roundtable, you will further read about:
What hedge funds are NZ based investors interested in?
How do local managers tackle the challenge of raising capital?
A breakthrough in mathematics of complex systems: Are the markets electrical in nature?
The Opalesque 2011 New Zealand Roundtable was sponsored by the New Zealand Absolute Return Association (NZARA) and took place March 2011 in Auckland with:
Anthony Limbrick, Portfolio Manager, 36 South Capital Advisors
Branton Kenton-Dau, Founder, Markets DNA
Charles Drace, Founder, Socrates Funds Management
David Copley, Managing Director and Chief Investment Officer, Trafalgar Copley
George Bayley, Founder, TGN Funds
Jeremy Muir, Partner, Minter Ellison Rudd Watts
Kenji Steven, Founder, NZ Capital Strategies
Mark Houghton, Founder, Saxe Coburg
Mark Sleeman, Founder, MS Capital Management
Mike Gibbs-Harris, Founder, MGH Asset Management
We also thank the 2011 Roundtable Series sponsor Custom House Group for their support. Enjoy “listening in” to the Opalesque 2011 New Zealand Roundtable!
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