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.
The business of joining Yarra with Nikko
Yarra Capital last week completed its acquisition of Nikko Asset Management’s Australian business, taking its assets under management to about $20 billion. Now the hard work begins.
Branding has been decided, with Yarra Capital to remain the overall brand, Nikko’s fixed income business to be subsumed into Yarra’s and the old Tyndall Asset Management brand being resurrected for the former Nikko Australian equities business.
Tyndall will remain a separate franchise to Yarra’s style-neutral Australian equities business, with no crossover in investment management activity and no change to its value investment philosophy or process, Yarra said in its notice last week (April 12). Those changes are expected to be completed this quarter.
The other important aspect of the deal is that Nikko will take a 20 per cent stake in the expanded company and forge a partnership whereby it has access to the funds management products for overseas distribution and Yarra will distribute Nikko products in Australia.
In terms of bringing the two businesses together operationally, Yarra’s first priority is to determine the appropriate operating model and executing on the streams of work.
The firm is then expected to run a tender for a new asset servicing partner, which will likely take place in the second half of the year. There are two incumbents, with Yarra using the old RBC Investor & Treasury Services, most of the clients of which have migrated to or are in the process of migrating to Citi, and Nikko using BNP Paribas Securities Services.
It is understood that RBC has committed to support the Yarra business through the selection process and transition. This can take several months and has been known to take a lot longer.
Garvin Louie, the interim managing director, said in last week’s statement: “We are delighted to have completed the acquisition… The combination, which has received very strong support from internal and external stakeholder groups, enables us to strengthen our relationship with clients and provides the scale to support further investment in talent, research, leading technology and operational excellence to continue to serve our clients.”
Louie, Yarra’s general counsel, had been sharing the COO role with Vito D’Introno, chief commercial officer, since the retirement of Brett Davidson, former COO, early last year.
Dion Hershan, who drove the establishment of Yarra with a buyout of Goldman Sachs’ Australian asset management business, is executive chair of an independent board and head of equities. If it matters much to the management, we can report many favourable comments from the industry about the return of the Tyndall name. Journalists are not alone in their appreciation of history.
