A joint venture between a Christchurch family investment firm and a UK private equity business has taken a 50 per cent stake in Auckland-based hedge fund-of-funds manager, NZAM.
Under the deal, most existing NZAM owners sold down half their respective holdings to LJ Partnership NZ (LJNZ) – a company equally-owned by London-based LJ Partnership, and Tailorspace, the investment arm of the Ben Gough Family Office. NZAM senior executive, Dryol Lowe, sold down his shares on August 17.
The NZAM downside-protection investment strategy, which has struggled during a record-breaking bull run for equities, would change over time, clients were told last week.
NZAM principal, Alan McChesney, says in the note there would be at first “some minor changes to how client portfolios are structured to improve returns”.
“Over the next months as we engage more with the international investment arm of LJ Partnership, we would expect there to be additional changes to portfolios,” McChesney says. “We remain extremely aware of where we are in the longer-term investment cycle and the potential headwinds to investment markets, together with our commitment to ensure client’s capital is protected. But we are also aware that clients need more than just capital protection.”
He says LJ Partnership, which shares NZAM’s “absolute return” philosophy, would offer clients access to a broader investment suite “particularly in the private debt and property related areas”.
“For some clients it will also provide us with the capabilities to offer ‘bespoke’ or tailored portfolios to meet their specific needs,” the note says.
LJNZ formed last year to invest initially in “local commercial property opportunities”, the note says.
The NZAM investment marks the US$15 billion LJ Partnership’s first foray into Australasia. The UK-headquartered investment business – about to rebrand as Alvarium Partners – employs about 200 people globally with offices in London, New York, Miami, Hong Kong, Auckland, Geneva, Lisbon and the Isle of Man, the note says.
LJ Partnership has made a number of wealth management purchases of late including the multi-jurisdiction Guggenheim Investment Advisors and the Deloitte London financial advisory business.
McChesney says LJ Partnership has “ambitious growth aspirations for New Zealand with NZAM the vehicle for further investment market related acquisitions”.
“Today’s announcement is also the first step in ensuring robust succession plans are now in place for [MZAM],” he says in the note.
Andrew William, LJ Partnership co-founder, has been appointed as NZAM chair. Tailorspace CEO, Brett Gamble, and Elliot Shave, LJ Partnership CFO, have also joined the NZAM board, replacing Raewyn Fong and James Caughey. McChesney and fellow NZAM principal, Simon Tompkins, remain on the board along with independent director, Jonathan Mason.
“[Williams] has recently moved to Auckland with his family from London to drive LJ Partnership’s expansion into the Australasian and Asian markets,” the note says.
NZAM, previously known as New Zealand Assets Management, is one of the country’s longest-running boutique fund managers. Established in 1990, NZAM, known primarily as a global hedge fund multi-manager, at one stage managed close to $1 billion.
According to the Disclose website, NZAM currently manages about $93 million across its retail products – including a recently-launched portfolio investment entity (PIE) version of Australian absolute return bond fund, Kapstream. The latest Melville Jessup Weaver (MJW) wholesale manager investment survey shows NZAM has about $240 million in its core Global and Alpha strategies.
Over the financial year to March 31, NZAM reported a net profit before tax of about $125,000 on fee revenue of almost $4 million compared to roughly $912,000 and $5.8 million, respectively, for the 2017 annual period.
Andy Morris, who joined NZAM in 2011 as principal, recently left the business. Last year NZAM chief investment officer, Greg Peacock, departed after a seven-year stint with the firm.
“There will be no immediate changes to the NZAM team as a result of this relationship [with LJNZ],” McChesney says in the note.