Sat, Jul 23, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Asia Pacific Intelligence

Boutique absolute return fund of funds searches for like-minded partners globally

Thursday, May 09, 2013

Mike Taylor, managing director and executive chairman of New Zealand boutique absolute return fund management house Pie Funds is on a quest to find his fellow small cap absolute return funds across the globe as he puts together his first focused fund of funds.

Mike Taylor

Pie was founded in December 2007, which with the benefit of hindsight was a pretty tough date to launch. "The global financial crisis hit as soon as we started" Taylor says in an interview with Asia Pacific Intelligence, "but it provided a great opportunity. We just had to survive 2008 and if you were there at the end you could capitalise when markets rebounded."

Pie has NZ$100m ($85m) under management in three funds, having started with just NZ$3m ($2.5m) in 2007 and has, as the only small cap specialist manager in New Zealand, carved out a niche in the space. The current three funds are the Pie Australasian Growth Fund, the Pie Australasian Dividend Fund and the Emerging Companies Fund. The planned new fund will be a Global Small Companies fund of fund.

The Growth Fund is in the top 50 funds globally out of over 180,000 ranked by Morningstar for five year returns, with a five return to 31st March of 27.6% per annum, 29.8% for the last year while the Dividend Fund has achieved 50.7% in the last 12 months.

The outstanding performance is partly down to Pie's policy of capping the amount of capital they will allow into a fund. "If we removed the cap we would get significant demand from investors but it would be detrimental to returns" Taylor says.

Investors come from the retail sector in New Zealand, attracted, Taylor says, by: "The daylight between us and our competitors in terms of performance." The New Zealand hedge fund industry remains a pretty small place with not too many funds, controversially lying at the bottom of the Morningstar listings of global fund industries. Taylor finds that his investors are generally people with a decent pot of money who want to allocate a little to a riskier investment, focused on producing returns.

The policy of capping capacity in Pie's existing funds has encouraged organic growth and now the firm wants to offer their investor base something else other than Australasia, hence the global quest. But based at the bottom of the globe, research can be difficult. "We would require a significant team of people on planes going out all over the world" Taylor says, so the firm is conducting its research to find other managers who look like them through data research and networking.

Taylor wants managers whose first goal is return; who have high conviction, a focus on small caps, not owned by an institution and who focus on performance to grow funds under management. Ideally these entrepreneurial fund groups will come from the US, Europe, the UK, Latin America, Asia and the emerging markets. Taylor says: "Initially I thought it would be relatively easy to find people who look like us but it's actually quite hard."

Taylor was inspired to set up a fund management firm because he found that retail managed funds in New Zealand were serial underperformers. "I found from my own personal investing that without too much difficulty I could perform quite well" he says, having managed his own portfolio and that of friends and family for some 10 years prior to establishing Pie.

Risk management for Pie comes through derivatives use and an ability to cash up to 100%. "We aim for lower volatility than the underlying indices in Australia and New Zealand - clients don't like volatility" Taylor explains. "The funds are very actively managed because in the small companies space things can change quite rapidly and we are not ashamed to admit if we get something wrong - if something changes we cut the investment" he says.

His aim for the new global fund is to have one of the lowest fee structures possible in a fund of funds; a concentrated portfolio which is absolute return but long only; an ability to show consistent alpha;  it will be capped at $250m and the sub funds that Taylor is looking at must 'eat their own cooking'. "The manager must have skin in the game" Taylor says, and he holds no equity investments outside of the Pie funds, having invested in both the Pie Australasian Growth Fund and the Pie Australasian Dividend Fund since inception.

Taylor was part of the 2010 Opalesque New Zealand Roundtable. You can read that here.

(This piece first appeared in Opalesque's AMB in April.)

 
This article was published in Opalesque's Asia Pacific Intelligence our monthly research update on alternative investments in the Asia-Pacific region.
Asia Pacific Intelligence
Asia Pacific Intelligence
Asia Pacific Intelligence
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Opalesque Exclusive: California-based manager launches long/short equity hedge fund with unique algorithm[more]

    Benedicte Gravrand, Opalesque London for New Managers: SJL Capital LLC, an investment advisory firm based in California, has launched its maiden fund, the SJL MarketDNA Hedge Fund LP. The fund, which began trading

  2. Manny Roman to move from Man to Pimco[more]

    Benedicte Gravrand, Opalesque London: Emmanuel (Manny) Roman, an investment world veteran, has been hired by PIMCO, the large US bond fund house, as chief executive officer. PIMCO's current CEO Douglas Hodge will assume a new role as managing director and senior advisor when Roman joins P

  3. HFR: Hedge funds post strong gains in mid-July as markets recover from Brexit losses[more]

    Komfie Manalo, Opalesque Asia: Hedge funds posted strong gains through mid-July as the equity markets continued the recovery from Brexit losses. The HFRX Market Directional Index gained +2.17% (+4.22% YTD) and the HFRX Global Hedge Fund Index gained +1.03% through mid-month (+0.19%

  4. News Briefs - Carlyle goes on trial for a financial-crisis meltdown, Private equity and venture capital outperformed public markets in 2015, Pippa Middleton gets engaged to hedge fund manager James Matthews[more]

    Carlyle goes on trial for a financial-crisis meltdown Carlyle Group co-founder Bill Conway was in court on this small island last week recounting one of the most bruising episodes in his private-equity firm’s history: the 2008 collapse of mortgage-bond fund Carlyle Capital Corp. Carlyle

  5. …And Finally - Two men fall off cliff playing Pokemon Go[more]

    From BizarreNews.com: Two men who fell from a seaside cliff north of San Diego told authorities they became distracted while playing augmented reality game Pokemon Go. Encinitas fire Battalion Chief Robbie Ford said one of the men fell about 50 feet down the bluff in Encinitas while the other man fe