Sovereign bond specialist Colchester Global Investors has launched a stand-alone NZ-domiciled fund offering the local market direct access to a strategy previously only available in multi-manager format.
Fronted by Wellington-headquartered fund-hosting firm Implemented Investment Solutions (IIS), the new Colchester Global Government Bond product comes wrapped as a portfolio investment entity (PIE).
IIS chief, Anthony Edmonds, said Colchester is a highly regarded government bond house familiar to many NZ wholesale investors through its presence in the BT Funds and AMP Capital global fixed income multi-manager products. Previously, Colchester was also on the Russell Investments global bond multi-manager roster.
“Colchester is a well-respected institutional investment manager offshore, particularly known for its unique sovereign bond strategy,” Edmonds said. “Even in a period of super low interest rates, Colchester continues to demonstrate the value of holding government bonds in a portfolio for defensive purposes and to provide yield.”
According to the new Colchester PIE product disclosure statement, the manager bases its investment philosophy on “the belief that investments should be valued in terms of the income they will generate in real terms”.
The London-based firm (although the NZ product feeds through to the Colchester Singapore entity) “seeks to invest primarily in sovereign debt securities that possess fundamental value”, the PDS says.
“Colchester believes securities that (i) possess high yields after allowing for the impact of estimated future inflation and (ii) are denominated in currencies that are either undervalued, or of a reasonable value according to purchasing power parity analysis, typically possess fundamental investment value,” the disclosure document says.
“Colchester carries out financial analysis on countries and individual issues in order to assess the issuer’s respective financial strengths and vulnerabilities. Having made a fundamental real assessment of the value of all country bond markets and currencies in the global opportunity set, Colchester then builds optimal portfolios seeking to maximise returns.”
Noah Schiltknecht, founder of boutique consultancy Makao Investments, said the Colchester PIE represented a positive development for NZ investors.
“It’s really exciting to see a quality sovereign bond manager offer a Kiwi dollar-hedged product to NZ investors,” Schiltknecht said. “Colchester has a differentiated strategy with no exposure to credit. NZ needs more funds in certain asset classes built for local investors – there’s still plenty of room for additional products and new strategies in most global asset classes.”
Angela MacPherson, head of distribution Australia with responsibility for promoting the Colchester’s PIE Fund to the NZ market, said the manager had secured some platform and model inclusions in advance of the launch.
“We are very excited to partner with IIS to bring our fund to the New Zealand market. The characteristics of this global government bond portfolio will provide investors with a defensive and liquid allocation that not only provides diversification to local and global credit funds but also to risk assets more broadly,” MacPherson said. “Australian financial planners have embraced the strategy and I’m confident that New Zealand advisers will also similarly see the benefits for their clients. I’m looking forward to the new travel bubble allowing us to come and meet planners in person.”
Founded in 1999 by current chief investment officer and chair, Ian Sims, Colchester manages about NZ$58 billion globally, expanding from its London base to open offices in New York, Singapore, Sydney and Dubai.
There is a $50,000 minimum for initial direct investments in the Colchester PIE with $5,000 increments thereafter for the fund, which carries an annual management fee of 0.77 per cent. Edmonds said that the fund will be available to retail investors and advisers on a range of wrap platforms in NZ.
Public Trust is supervisor with custody supplied by BNP Paribas Fund Services Australasia and MMC as registrar.
The Colchester product marks the 10th fund-hosting client for IIS but Edmonds said several more are queued up for launch this year.