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What Black Swan returned to investors in 12 months |
New Zealand hedge fund managers have been attracting investors as their returns outperform their non-domestic peers. Last year, the Ernst & Young New Zealand index returned more than 20% while the global average index, the HFRI index, lost almost the same amount. There are now about 40 boutique fund managers across hedge funds, commodity trading advisers and absolute return equity managers in New Zealand. Most are very small, managing assets in the tens of million dollars range. This year, returns have come down compared with the HFRI but are still in positive territory. Up to the end of April, the New Zealand index was up 1.35%, whereas the HFRI index was up 4%.
One of the firms, 36 South Investment Managers, closed its Black Swan fund in March after returning 236% over a 12-month period. In May, the firm moved the front office to London from Auckland in order to be nearer investors. Anthony Limbrick, chairman and chief executive of Pure Capital, a quant hedge fund in New Zealand, says the country is enjoying increased interest from investors because of last year’s stellar returns. His firm made 79% last year on one of its strategies, Pure European BetaMatch. That strategy is up 21% year to date, contributing 6% to the investors’ overall portfolio which the product was designed to work with, creating an offset to problems with falling equity markets.
Limbrick says that being far away from the main markets forces managers in New Zealand to work harder at their strategies. “Being so far away, you have to have a better story than most managers to entice investors to come and visit and allocate to you.”
Given the difficulty in getting investors to visit, many of the New Zealand funds are, while not moving most of their operation to London as 36 South has done, at least considering an office there to be closer to investors. Pure Capital is setting up an office in London, and says it might well consider having a substantial proportion of its operations there.
The New Zealand Absolute Return Association (NZara), is encouraging managers to maintain some presence in the country.
“New Zealand managers should actively maintain a global business strategy, keeping core business functions in New Zealand where it is cheap and efficient to run a business, as well as great for lifestyle, but also maintain a foreign presence in a major financial centre for distribution and, in certain cases, trading purposes,” says Limbrick, who also chairs NZara.
