Newly formed Australasian equities wholesale boutique firm started by former Pie Funds portfolio managers has already seen “strong interest” from investors ahead of a formal launch next month.
Chris Bainbridge, who left Pie this March after almost 10 years at the business, said Discovery Funds Management – a company he co-founded with former colleague, Mark Devcich – would be “limited to high net-worth individuals, eligible investors and those who don’t require disclosure under the Financial Markets Conduct Act” as a wholesale venture.
Both Bainbridge and Devcich have committed “virtually our entire liquid net worth” to the new investment vehicle to be launched under the Discovery label as the Founders Fund early in September.
Devcich completes his Pie time at the end of August after an 11-year career at the manager that included a three-year stint as chief investment officer (CIO) ending just as Bainbridge departed. Pie founder, Mike Taylor, returned as CIO at the time while Devcich reverted to portfolio manager duties.
According to Bainbridge, Discovery would follow a “high conviction strategy” with a concentrated portfolio of 20 to 25 stocks, aiming to build on the founders’ Australasian small caps expertise garnered at Pie.
“The objective is to deliver outstanding performance through deep fundamental research and rigorous risk management,” he said. “Size is the enemy of performance so capacity will be strictly limited, with the fund closing to new investors at $300 million.”
He said the strong alignment with investors and singular strategy and product would give Discovery an edge.
“We believe there’s nothing more powerful than an experienced and proven team, highly motivated with a new nimble fund,” Bainbridge said.
Discovery goes live on September 2.
Meanwhile, Taylor has restocked the Pie shelves, appointing two portfolio managers – Kent Williams and Greg Kang – last week.
Former AMP Capital small-caps specialist, Williams, joins the Pie Sydney office with portfolio management duties covering the Australasian Growth 2 and Australasian Emerging Companies funds.
Kang, recently returned home from Korea, takes on the global shares and environmental, social and governance (ESG) analyst job in the Pie Auckland office, which will hold six staff including data specialists and analysts. He was formerly head of research and senior portfolio manager for the Seoul-based Eastspring Investments.
Pie also maintains a satellite office in Havelock North with three client services and operations employees while the London and Sydney outposts hold three investment managers or analysts apiece.
Pie has seen significant staff turnover during the last couple of years but has been growing again recently with the latest appointments including Michael Goltsman as a Sydney-based portfolio manager and Andrew Heap as investment analyst in London.
Peter Simpson, based in Havelock North, was also named as general manager in March after previously consulting to Pie.
Taylor said Pie intended to keep both the NZ and offshore offices open.
“I expect investment team members to continue to grow across all three offices, over the years ahead,” he says in the latest Pie monthly newsletter.
Most Pie funds have suffered during the 2022 market drawdown that has seen outsize hits to the small-cap sector the manager tends to play in. For example, the flagship Pie Growth and Growth 2 funds were both down over 30 per cent for the 12 months to the end of June this year, more than double the losses recorded by the median manager in the latest Melville Jessup Weaver (MJW) investment survey.
The Pie Australasian Dividend and Emerging Companies funds also fell during the June quarter and 12-month periods but more in line with peers. As well, the Pie-run Juno KiwiSaver funds all huddled down the bottom of the three-month and annual performance tables in the most recent Morningstar report on the sector.
However, over longer periods both the Pie and Juno strategies generally hover mid-table with the manager’s Australasian Dividend still atop the MJW miscellaneous Australian and NZ shares category for the three-, five- and 10-year periods.
Taylor said Pie, along with most managers, experienced a significant performance bump in July with returns to date in August also looking healthy.
The manager, which reported almost $9 million of net profit on revenue of $31 million for the 12 months to March 31, had seen funds under management fall a little from a peak of $2.6 billion to current levels of about $2.3 billion, he said.