Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
T. Rowe Price offers new story for Aussie equities range
(Pictured: Randal Jenneke)
Australia has a lot of Aussie equities managers. There are 139 Aussie equities funds in the Mercer survey, for instance, and this does not include hedge funds, insurance and government funds, and funds which don’t pass various requirements for entry to the survey.
So, a newcomer, even one with a great international pedigree, can rightly be greeted with some suspicion. Australia is a tough market.
According to T. Rowe Price head of Aussie equities, Randal Jenneke, the Australian market has had an evolution in the lifecycle of the boutique fund manager. For about a 10-12-year period prior to the global financial crisis boutiques were flavor of the month.
“The boutique firm is now mainstream,” Jenneke says. “But its underpinnings are more fragile than people think. We’re a boutique, but we operate within a big firm.”
Jenneke was a senior portfolio manager at Schroder Australia prior to joining T. Rowe Price in 2010. He had previously worked for UBS Asset Management, Citicorp Asset Management and Chase Manhattan Bank (now JP Morgan). He launched the T. Rowe Price Aussie equities fund in 2012, with some money seeded by the Baltimore-based global parent, and now has one-year performance numbers in the important Mercer survey.
For the record, his debut year produced for the fledgling fund a solid number 25 in the Mercer rankings. The one-year, to December 31, return before fees for the T. Rowe Price Australian Equity Fund was 26.39 per cent, versus the index return of 20.20 per cent. Since inception, in April 2012, the fund has returned 23.26 per cent against the index return of 18.00 per cent. The market value of the fund as at December 31 was a nice little $15 million.
T. Rowe Price is still best known in Australia for its international investment strategies. Murray Brewer, the head of sales and marketing in Australia, is also ex-Schroder. His business strategy was to start with global equities and then diversify the offering into emerging markets and Asian-focused mandates. Adding Australian equities to the mix is a big commitment.
Brewer says: “When I joined seven years ago, in 2006, T. Rowe was looking to increase its coverage of the Australian market from an investment perspective. They were putting on analysts in Singapore and London. But then, in 2008, things were put on hold for a while. We started to get momentum again in 2009 and I knew we could provide a good [Australian equities] service. Being a quality growth manager, there are a certain number of players in the market, but not that many.” The first external institutional client for the Aussie equities fund is due to come on board in the next few weeks.
T. Rowe Price, globally, tends to give its heads of investments around the world a lot of latitude in terms of style. Jenneke says that the style could probably be described as more growth orientated than value, but he doesn’t like to be pigeon-holed, as consultants (and journalists) tend to want to do.
“The most important thing for us is that we are bottom up and research driven,” he says. “We are trying to find businesses which are adding value for shareholders the fastest.”
Jenneke believes that in the current improving climate, the market is struggling to price certain businesses appropriately and he, with his five-person team, is looking to exploit that.
