New ship in the NZ funds management fleet officially left the drydock last week with a $20 million launch target in view.
Chris Bainbridge, co-founder of Discovery Funds Management, said the wholesale-only business had fielded considerable interest from high net worth investors and advisers in the pre-release period.
Bainbridge and co-founder, Mark Devcich – both ex Pie Funds portfolio managers – have tipped in most of their personal wealth, too, to seed the new concentrated Australasian shares fund as the pair seek to replicate the performance highs set at their former shop.
According to Bainbridge, the single-fund approach of Discovery would allow the duo to focus on managing money rather than asset-gathering and multi-product releases.
“In funds management there can be a conflict between what’s good for the business and what’s good for investors,” he said.
“We are the only equity holders in Discovery. When you bring on other shareholders, they usually want asset growth. But we want to focus on performance.”
Nonetheless, some asset-gathering is necessary with the manager setting a target cap for the fund – that will hold up to 25 ‘best ideas’ Australian and NZ stocks – of $300 million.
“At that size we can remain nimble and liquid but also at a scale that makes us relevant to brokers,” Bainbridge said.
The Discovery fund will typically invest in NZX and ASX firms in the $500 million to $1 billion valuation range that meet its ‘four Ps’ philosophy of: potential; predictability; people; and, profitability.
And despite opting to remain a wholesale operation, Bainbridge said the strategy would “belts-and-braces, look, walk and talk like a retail fund”.
While the wholesale rules don’t require it, Discovery has appointed Public Trust as an independent supervisor while using Adminis for custody and registry, PwC as auditor and legal firm, Chapman Tripp.
“We will have a monthly newsletter as well,” he said. “The aim is to mirror the transparency you’d get from a retail fund.”
The Discovery fund features a 1.2 per cent management fee plus a performance booster dependent on beating a market-linked benchmark.
Launching amid the most sustained period of market uncertainty experienced for some time might seem daunting but Bainbridge said the volatile conditions should suit active stock-pickers.
“Volatility does provide opportunity,” he said. “You make your best money in tough markets, even if you don’t realise it at the time.”
Discovery, Bainbridge said, would keep an eye on global market conditions without letting macro-factors determine its course.
“We might all be sailing on the same ocean but we’re in different boats,” he said.