First Sentier Investors has cancelled a poor-performing responsible-tilted global listed infrastructure strategy in a move that will see the one of the largest and longest-running funds of its kind in NZ renamed and restocked with energy companies.
Under the shake-up revealed late in February, long-time First Sentier infrastructure portfolio manager, Trent Koch, has also left the business.
According to a First Sentier spokesperson, the Sydney-headquartered US$135 billion manager recently reviewed its global responsible investment listed infrastructure strategy with a follow-on impact for “funds in the UK, Ireland, Australia and New Zealand”.
“In New Zealand, a decision has been made to reposition the Fund and change its name to the First Sentier Global Listed Infrastructure Fund,” the spokesperson said.
Effectively, the change – due to be implemented by the end of May –will see NZ investors in the fund shifted to the First Sentier flagship infrastructure strategy that has been available in other jurisdictions.
NZ clients previously only had access to the responsible-themed infrastructure fund, which held more than $360 million as at the end of last year, the December quarter Melville Jessup Weaver (MJW) investment survey shows.
“This strategic decision has been made following careful consideration of evolving market dynamics including structural shifts in energy markets, which have impacted the performance of the Fund,” First Sentier told investors in a note.
The First Sentier responsible listed infrastructure fund fell 8.2 per cent over the December quarter, according to the MJW report, compared to the benchmark -2.6 per cent: the fund returned 1.5 per cent for the 2024 calendar year versus the benchmark 12.6 per cent while finishing well under index for all reported periods up to 10 years.
By contrast, the Australian dollar-denominated core First Sentier global listed infrastructure strategy was slightly ahead of the benchmark for the 12 months to January 31 and on par over the 10-year period.
The performance woes spilled over as well to the Mercer multi-manager global listed infrastructure strategy that includes the First Sentier responsible product as an underlying fund.
MJW figures show the $308 million Mercer fund was down 8.9 per cent for the December quarter while finishing last over all periods among the small cohort of global listed infrastructure strategies covered in the survey.
It is understood that Mercer is also about to launch a passive sustainable global listed infrastructure fund with some exclusions such as oil and gas pipelines.
Chris Douglas, Mapua Wealth partner, said the First Sentier responsible version of the strategy was hit by the double-whammy of no exposure to the recently high-returning oil and gas pipeline and “midstream energy” sectors and overweight holdings of ‘green’ energy stocks that have suffered over the last few years. (For example, the S&P Global Clean Energy Transition Index reported annualised losses of almost 17 per cent for the three years to early March.)
Douglas said First Sentier has indicated it didn’t expect to “be able to close the gap anytime soon” with the current responsible strategy settings.
He said the manager had made a “pragmatic” call but would still employ environmental, social and governance (ESG) principles within the revised investment framework.
The First Sentier spokesperson said the “key change from a portfolio holdings perspective would be the inclusion of stocks involved in energy midstream”.
“For example, the inclusion of natural gas infrastructure to meet the structural growth in demand for power from AI/data centres and the US manufacturing renaissance.”
The manager was also “assessing RIAA [Responsible Investment Association of Australasia] certification requirements” for the fund in the wake of the strategic rethink.
Furthermore, First Sentier promoted William Thackray to senior analyst listed infrastructure following the departure of veteran Koch, who has served almost 15 years on the team including four with predecessor business, Colonial First State Global Asset Management (CFSGAM). Peter Meany heads the First Sentier global listed infrastructure team.
Japanese firm, the Mitsubishi UFJ Trust and Banking Corporation, bought CFSGAM off the Commonwealth Bank of Australia in 2019, later rebranding it a First Sentier.
In CFSGAM times, the global listed infrastructure fund was a pioneering and popular strategy among institutional investors on this side of the Tasman, building a wholesale portfolio investment entity (PIE) version in 2013 that extended to a retail offer five years later.
But several other global listed infrastructure funds – most in PIE form – now compete for NZ investor attention including two from Mercer (one offered under the Mercer Macquarie – ex AMP Capital – banner), Kernel Wealth, Magellan, Russell Investments, Salt Funds Management (managed by Cohen & Steers) and, as reported elsewhere this week, Maple-Brown Abbott.