Q&A with PM Capital CIO Paul Moore

Award-winning fund manager PM Capital has launched a new generation listed investment company. Go 2025. The company founder and chief investment officer, Paul Moore, explains what the fund is all about and what PTrackERS are.

Tuesday, July 17th 2018, 8:42AM

1. Why are you launching a new global equities LIC?

PM Capital chose to be the investment manager for a new global equities LIC because we felt that investors would benefit from the combination of an experienced global equities manager, with a structure that we think tilts the landscape in favour of investors.

2. What’s different about it?

PM Capital is a strongly performing global equities manager. With this investment company, however, you get more than the management. Its major innovation is that PM Capital GO 2025 is issuing a first of its kind security called ‘PTrackERS’, which stands for Portfolio Tracking Exchangeable Redeemable Security.

It’s a first in the Listed Investment Company (LIC) space. We believe PTrackERS represent a real step forward for investors looking for a global equities exposure.

3. How is it different from the usual LIC?

On a look-through basis, PTrackERS represent your investment exposure to an underlying portfolio held by the Company – like a LIC – but with the benefit of allowing you the option to exit your investment based on NTA as at 30 June 2025 (hence ‘GO 2025’).

PTrackERS are the next generation of (LIC) securities and have been developed to improve LIC investor outcomes and choice.

4. Can you explain the benefits of the PTrackERS?

LICs regularly trade on the ASX at discounts to their Net Tangible Assets, a negative for traditional LIC investor returns. While PTrackERS may also trade at a discount or premium to NTA, the ability to redeem at a known date based on NTA provides investors access to the underlying portfolio performance and should help market prices trade closer to NTA than would otherwise be the case.

Investors can sell their holdings any time on market. However, if PTrackERS investors want to realise their investment on 30 June 2025, they have the choice of redeeming based on NTA, selling on the ASX, or, if not redeemed or sold, PTrackERS will be automatically exchanged for fully-paid ordinary shares of the PM Capital Global Opportunities Fund (PGF).

It is in effect a redemption safety net, with investors having three choices, rather than what they get with other LICs, which is to just sell on market no matter if at a deep discount.

The ability to sell or redeem makes us highly accountable for investment performance and communication, as clients can redeem if unhappy.

PM Capital is paying for all costs of the offer and that means every dollar invested will be generating investment returns from day 1, and the NTA at the listing date will be equal to the issue price.

We’re targeting a distribution yield of 3-4% a year, plus franking where franking is available.

5. What kind of returns have you produced?

For both Financial Year 2017 and Calendar Year 2017, PM Capital’s managed funds and mandates appeared as #1 ranked for fund performance over 5, 7 and 8 years compound returns in their Morningstar peer group of over 140 peers.

The PM Capital Global Companies Fund is in its 20th year of operation. As at 31 May 2018, the PM Capital Global Companies Fund had generated compound annual returns DOUBLE that of the MSCI World Net Total Return Index after all fees and expenses. Fund returns have been 9.0% pa vs the index of 4.5% per annum.

6. How will the fund be invested?

PGF’s and GO 2025’s Investment Strategy will be managed in the same way as PM Capital’s unlisted managed investment scheme, the PM Capital Global Companies Fund.

7. Is this a good time to be buying global equities considering all the political uncertainty at the moment?

Yes. It is almost impossible to pick where macro situations like political uncertainty will end up. But there are many opportunities out there at the moment.

We’re looking for anything where the earnings are underpinned, have the ability to grow from here, but that that earnings power is being underrepresented in their price.

A classic example is the domestic banks – not in Australia or New Zealand, but in Europe and the US like Bank of America and Wells Fargo. They’ve got their capital in order after the GFC and you’re starting to get into a sweet spot in the US economy.

If you adjust for the excess capital they’re on about 9-10 times earnings with an effective yield of 9-10%. There are opportunities out there.

8. What are the fees and why is there no performance fee?

The management fee is equal to 1.50% pa with no performance fee, giving clarity. PM Capital is paying for all the offer costs.

9. Why should New Zealand investors consider investing in the fund?

We’ve been investing for New Zealanders for 6 years and we’ve increased our efforts to give more information about global markets and how we’re investing for them. We think New Zealanders are underweight global equities, so we think there is a clear case for increasing their exposure to that part of the market.

At the manager level we’ve shown the ability to produce attractive returns over long periods and were awarded the Fund Manager of the Year 2018 (long/ short equities) by Money Management/ Lonsec. We’re experienced – we’re now into our 20th year of investing in global equities.

At the security level, the PTrackERS innovation means investors get more control and choice. Along with the benefits of other LICs, GO 2025 goes a significant step further by offering the ability to redeem based on NTA, rather than having to sell on market no matter what discount the security is at.

We think it’s a compelling offer that produces a fairer outcome for investors.

- For more information contact Aaron Gascoigne

Email aaron@kipartners.co.nz
Phone 021-715003

Tags: PM Capital