Now for regional emerging markets funds

0

(pictured: Kate Mulligan)

Kate Mulligan has made a return to funds management proper, setting up a separate company from her legal, compliance and operational advice business to launch a specialist manage-the-manager strategy investing in Latin America. She intends to roll out other specialist regional funds.

Mulligan, who was the managing director of Advance Asset Management from 2003-2006 and then the founder of the Ventura-All Star multi-manager global fund backed by the former PIS planning group, has spent about 18 months on the launch of King Irving Funds Management (KIFM) with her husband Richard Mulligan, who has also worked in financial services for most of his career.

The first fund is a wholesale offering which has been seeded with $30 million by the chosen manager, the Chilean-based SURA Asset Management. SURA is a US$112 billion manager which is part of an insurance company that is the largest across what are known as the “Pacific Alliance” countries in Latin America. They are: Mexico, Colombia, Peru and Chile.

The four countries formed the Pacific Alliance in 2012 as a trading bloc to better engage with the world across the Pacific and North America as well as with the rest of Latin America. They have arguably the strongest and fastest growing economies in the region and also have reasonably common and robust legal systems. They have been referred to as “the new China”, albeit with a total population of 216 million.

KIFM has an independent chair, another industry stalwart, Bleddym Gambold, and Mulligan said took its time to both select and do due diligence on SURA, which also sent representatives to Australia for its own due diligence and to talk to the regulators.

“We think we are the first Australian fund manager to be registered to trade in Chile, Mulligan said. Chile has a well-developed pension system not too dissimilar to Australia’s, with a compulsory component.

KIFM has outsourced its backoffice and some middle-office functions to State Street, which uses Citi as sub-custodian in the Pacific Alliance countries.

While the investment product appears very specialized, Mulligan argues that it fits within the way sophisticated strategies are developing among super funds and family offices.

“We are looking to offer new areas of growth, which fits within the core-and-satellite model of investing,” she said. Plus, there is an increasing interest in splitting up the emerging market world for investment purposes – not treating them all as equals or even similar. This is particularly the case in Latin America, where Brazil has been a recent drag, but also in Asia, where Chinese volatility has come to the fore this year. And then there’s socio-political instability in some countries, such as Russia, but not others.

The Pacific Alliance countries are predicted to grow at three or four-times the rate of the troubled Brazil over the next few years. The days of the BRICs are long gone.

SURA is a traditional bottom-up manager which looks to beat its indices by 200-400bps. It has macro overlays for country factors and ESG factors. It has 45 investment professionals and has operated since 1981. In 2011 it acquired the ING business in Latin America.

For the Australian end, KIFM has appointed Dorothy Zelma as its operations manager, to provide daily mandate monitoring, portfolio reviews and interactions.

Mulligan said that the firm was very much following the Advance model of active engagement with the underlying managers. “One of the things I learned at Advance is that you should take your time and commit to a few capabilities. I expect we will have three or so funds in the next five years. The next one is likely to be another regional emerging markets fund.”

Share.