New flavour for PIE
Pie Funds is launching a new lower-cost fund that takes it out of the small-cap space for the first time.
Monday, April 30th 2018, 6:00AM 
1 Comment
The Pie Climate Friendly Fund will launch on Tuesday.
The Fund will invest predominantly in companies with lower exposure to carbon emissions and fossil fuel reserves.
These companies will be part of low-carbon benchmarks or selected with the assistance of third-party research providers, specialising in carbon risk and climate impact.
The fund will invest in any vehicles of any size, whereas its other funds focus specifically on small-cap investments.
Investments will include direct equities, ETFs and it may also hold cash.
Chief executive Mike Taylor said that would increase the options available within the Pie Funds stable for advisers, who might want to limit the amount of client money in small-cap-specific vehicles.
He said Pie was rolling out an wider environmental, social and governance (ESG) policy for its funds. It had started with this fund but would cover all investments.
Initial screening work had shown there were no holdings that would need to be sold down, he said. Pie had recently established its own ESG committee.
The fund charges performance fees of 0.48% of net asset value and an annual management fee of 1.25%. The performance fee is linked to the fund’s high-water mark and is not associated with the performance of a benchmark.
The minimum initial investment is $25,000.
Taylor said there was investor demand for such a product. Pie Funds was often asked when it was going to launch an “ethical” fund – but he said describing a fund as “ethical” was difficult because it was not a term that could be quantified.
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As regards fees Good Returns notes that Pie Funds charges a performance fee on whatever its fund returns without any reference to a benchmark. The word “performance” implies performing well relative to some yardstick yet the structure rewards any return whether it is above or below the market.
Pie Funds marketing talks up its stock picking abilities but the PDS reveals that up to 50% of the fund could be invested in passive exchange traded funds. Pie Funds will be charging a performance fee, implying performance, when up to 50% of the fund will be invested in passive funds, which by definition will not outperform. This is a great business model for active fund managers because it requires no thinking and the actual fund management via the ETF is paid for by investors, on top of the normal management fee plus performance fee. Readers will be aware that in the UK and Europe there is an ongoing witch-hunt by the FCA who are naming and shaming active fund managers who are closet indexes. Many NZ fund managers take closet indexing to the next level by simply owning ETFs.
I also note that Pie Funds have moved to vertically integrate so it now apparently offers an “advisory service” as well as originating products. Pie Funds is thus now a competitor for independent advisors. The future for independent advisors is, as the Royal Commission has shown, doing the right things by clients by fulfilling their main job of choosing the best products. With most of our competitors vertically integrated it is pretty easy to do.
Regards
Brent Sheather