Despite being a growing reservoir of funds under management, this critically important pool of capital is confronting mounting problems collating and disseminating key data in a timely manner.
The ratings house is pinning its growth strategy on a revamped methodology that increases the emphasis on governance to 25 per cent – a timely move considering APRA’s proposed reforms.
… as Remerga’s sustainable EM fund offers lower fees
The recently launched Remerga emerging markets ‘sustainable leaders fund’ has introduced an innovate fee structure for investors which rewards them for having a long-term outlook.
The boutique manager charges 45bps plus a 10 per cent performance fee over benchmark for the first three years of an investor’s relationship, dropping to 40bps and then 35bps after five years,
According to Craig Mercer, the CIO and co-founder, alongside Warwick Johnson, fund manager fees should be better aligned with the interests of super funds, which are “patient investors”.
He says that the greatest advantage you can have as professional investor such as himself is to have access to “permanent capital”. Investing in emerging markets in general tends to work best over long periods and Remerga wants to encourage long-term horizons from its clients.
Transaction costs in emerging markets have tended to come down in recent years, he says. The total transaction costs in the Remerga portfolio is no more than 40bsp, which includes all brokerage and commissions.
Mercer says that the most pleasing aspect of doing all the research his firm does to come up with its buy recommendations is that companies with great governance tend to be superior in other aspects of their businesses “and are great investments”. The best companies, for instance will watch their suppliers for their own governance – such as use of child labour – and make sure they have the same governance principals as the investee company.
“The main problem we face is that those companies will also tend to trade at higher multiples.”
The Remerga strategy is a concentrated portfolio of up to 40 names – currently 25 – chosen from a screened universe of about 1,000. There are about 50 names on its current “buy” list waiting for an adjustment in valuations.
