The best of the best from both sides of the Tasman
Alliance Capital Management’s equities portfolio manager Andrew Bascand reckons there is a place for a little bit of home cooking in your investments pantry.
Sunday, July 1st 2001, 10:11PM
Alliance Capital Management’s equities portfolio manager Andrew Bascand (pictured)reckons there is a place for a little bit of home cooking in your investments pantry.
Are Australasian equities a forgotten asset class?
In recent years, investors have eagerly adopted the message that "global is good" and have perhaps tended to forget about New Zealand and Australian equities in favour of investing offshore, perceiving there to be bigger and better opportunities internationally.
However, knowledgeable investment specialists still do advise maintaining some domestic exposure, and it’s worth remembering that in Australasia there have still been some very good returns available, even during times when the global economy has prospered.
There is a strong argument in favour of keeping some Australasian equities in your portfolio. AXA New Zealand operates a very successful Australasian equities fund on the basis that although we are a seasoned global company, we also believe there is a place for a little bit of "home cooking" in your investments pantry.
If you’re looking for an investment that uses the skills of both Australian and New Zealand specialist research teams; has a strict selection process, a hands-on approach and a team of analysts passionate about their product, then you should take a close look at the AXA Australasian Selected Equities Trust (SET).
The SET, managed by AXA’s investment management partner, Alliance Capital Management New Zealand Limited, has proven to be such a reliable and successful form of investment that it has a five star Morningstar rating (as at 31 May 2001). It was ranked amongst the top retail trusts in its sector for the past three years.
How does it work?
The Trust invests in shares listed on the New Zealand and Australian Stock Exchanges and both markets are rigorously analysed. The companies are subjected to an intensive screening process and Alliance Capital’s analysts are constantly evaluating existing stocks and new opportunities.
Alliance Capital Management New Zealand’s portfolio manager, Andrew Bascand, a former portfolio manager and managing director with Merrill Lynch in London, manages the Trust applying Alliance Capital’s strong investment philosophy.
It is a philosophy that encourages investment purely for growth and advocates full investment in shares at all times. It is also a philosophy that has been adapted in many overseas share market portfolios but is fairly new to New Zealand.
"I have seen this philosophy work in overseas markets and New Zealand has started to embrace the same philosophy. We are excited to offer this to New Zealand investors."
Andrew believes this philosophy is particularly valuable to investors because the equity market rewards companies that deliver consistent long-term earnings growth and companies with "value" characteristics reward investors as earnings improve.
The stock for the portfolio is also limited to 20 companies, which means only the best of the best are hand-picked, making the SET a truly active portfolio.
"The key aspect is that you invest in equities for growth not just because they are cheap or have a high yield," says Andrew. "And therefore you have to look at the characteristics that drive growth in terms of profit."
The Screening Process
The SET will not admit stocks until the New Zealand and Australian markets have undergone an intensive screening process and companies with the highest expected profitability have been identified.
This screening process is done in several ways. Investment managers first focus on two measures - Return On Equity (ROE) and Earnings Momentum.
"We have a variety of screens that look at the historical return measures and prospective equity measures," says Andrew. "We have demonstrated these measures over a long period of time – 10 year time frames – in markets such as UK, France, Germany and particularly Australia and they have generated additional information which has been turned into enhanced returns for investors."
Stock is then ranked according to the best and worst forecasts and data from the ROE and Earnings Momentum research is combined and analysed. The portfolio manager then carries out a price volatility screen to see whether the stock is overbought or oversold.
Kicking the Tyres
The final and important part of the process is probably one that makes the AXA Australasian Selected Equities Trust so appealing. It requires a hands-on approach where the portfolio manager physically visits company premises once the best stock has been selected.
"You have to kick the tyres on these companies," says Andrew. "You have to see the companies, the managers and the analysts. If we are thinking about buying or selling a company then we have to know the absolute ins and outs."
Andrew, who joined Alliance Capital Management New Zealand last year after seven years in London, describes this process as a disciplined approach of investment.
"It’s a repeatable process but it still has the challenge of having to check the companies, do the homework. And checking the companies is particularly important in New Zealand because the pool of analysts is very weak relative to overseas. You might only have four or five analysts following a stock in New Zealand compared to 15 – 20 overseas."
Why invest in the SET?
Andrew Bascand, who has brought a wealth of overseas experience to the New Zealand markets, is as passionate about the AXA Australasian Selected Equities Trust as if he was investing his own money.
"I am passionate about the SET, which is why I’m in the business," says Bascand. "I often get frustrated because sometimes you get clients who come to you and say they only want their funds managed in a certain way such as matching the index. That’s fine for the people that want this, but I get frustrated because these people aren’t getting the best opportunities. So, I think that if this is my money, then how would I run it?"
Andrew says what he particularly likes about the SET is that it has a nice balance of New Zealand and Australian stocks and is supported by an Australasian team of seven researchers and managers with more than 45 years of experience in the industry. As well, it has Alliance Capital’s global research network available to give a global overview.
"Even though I run the AXA Australasian Selected Equities Trust, I always bang the table first, on getting the global allocation right first. For someone who has a 25-30 year retirement time to go, they should invest 30% – 40% of assets overseas. I think they should invest at least a portion of their wealth in Australasian equities and I think the AXA Australasian Selected Equities Trust is a fantastic product to do that with."
|
1 year % |
2 years %pa |
3 years %pa |
5 years %pa |
|
|
Returns net of tax and fees to 31 May 2001* |
10.4 |
11.6 |
14.9 |
8.2 |
|
Ranking against universe of NZ and Australian retail Equities products* |
2/24 |
2/24 |
1/22 |
2/14 |
*Universe of New Zealand Equities Trusts as at 31 May 2001, as measured by independent research house Morningstar. Past performance is not necessarily a measure of future returns.
Alliance Capital
Alliance Capital Management LP. is a leading global investment manager that specialises solely in investment management, using both growth and value investment styles. It spends more than US$50 million a year on research which it uses solely for investment decisions on behalf of its more than 220 investment portfolios, representing over 6.5 million shareholder accounts.
Although owned by AXA, Alliance Capital still has independent listings on the New York Stock Exchange. It is a research-orientated company and employs more equities research staff than any other fund manager.
Contact your investment adviser or AXA New Zealand on 0800 808 801, or email
askus@axa.co.nz for your copy of an investment statement.*Past performance is not necessarily indicative of future results. Assumes an investment was held for the full period and that income has been reinvested. All figures are shown net of fees and tax.
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