In a tilt at an under-serviced middle market, Mint Asset Management is to launch a new fund allowing investors to dial risk up or down according to taste.
Rebecca Thomas, Mint chief, said investors in the Diversified Growth Fund (DGF) – due to go live on December 10 – could set risk exposures in “any ratio” in combination with the group’s Diversified Income Fund.
Thomas said the DGF would enable retail investors and advisers to create flexible, risk-appropriate portfolios with the single multi-asset solution complementing the income fund.
She said the fund was aimed at advisers looking for a cost-effective way to service mass affluent clients as well as direct investors.
“We think it would work equally well for smaller wholesale investors too,” Thomas said.
While the DGF front-end includes the novel risk-mixer option, the underlying investment portfolio also marks out new territory for Mint.
The fund’s strategic asset allocation (SAA) benchmark includes a hefty 60 per cent allocation to global shares, which moves Mint beyond its traditional Australasian shares stomping ground.
Mint does have a 15 per cent allocation to global shares in its Diversified Income Fund (launched in 2014) but the heavy weighting in the DGF prompted a major investment process review.
“We tested whether the quantitative factors we use to select Australian and NZ stocks would have the same efficacy for a global solution,” Thomas said.
Marek Krzeczkowski, Mint quant analyst, said the review back-tested the stock-selection process across 30 years of international multi-asset class market data.
Krzeczkowski said the modeling techniques identified market risk premiums across asset classes based on a range of measures rather than simply volatility.
“We also considered tail-risk [or the chance of extreme outcomes] for each asset class to develop our risk-return expectations,” he said.
His analysis also tested the Mint’s five quantitative factors – including credit quality, earnings growth and momentum – both singly and collectively against the global data.
Based on the research, Mint has set a long-term forward return expectation of the DGF at the current SAA of 8 per cent.
“The review showed our quant process works well with global equities,” Thomas said. “But we also have a qualitative process to help screen stocks.
“Not owning things can be a hugely proportional factor in returns.”
David Boyle, recently-appointed Mint head of sales and marketing, said the DGF was pitched at an often-neglected audience of mass-affluent New Zealanders looking for growth-oriented investments – and advisers who service that cohort.
“It can help meet that advice challenge for those investors who are hard to service without charging high fees,”
Boyle said. “We think it will also be easy to use for the ‘missing middle’ of Kiwis – who might just have their money in the bank.
“There’s a $170 billion in term deposits in NZ, which is leaving investors exposed to inflation risk.”
As well as the global shares exposure (in developed markets only) the DGF has an SAA weighing of 15 per cent apiece in Australasian equities and NZ fixed income, 5 per cent in listed property and the remainder in cash.
Mint will apply a tactical asset allocation (TAA) overlay – reviewed probably every quarter – to the DGF within wide ranges, including the ability to go 100 per cent to cash or 80 per cent in global equities.
The fund also incorporates Mint’s overarching environmental, social and governance (ESG) approach, which was updated in a just-released statement of investment policy and objectives (SIPO).
According to the Mint SIPO, the manager has expanded the ESG policy to include “not investing in the tobacco, armaments, uranium or pornography sectors”.