More than two years after the move from Craigs Investment Partners to the NZX, QuayStreet has secured its place as an active room in a passive house.
The outcome wasn’t a given.
As the NZX posted in its 2022 annual report, one original goal of the $31.25 million purchase (with a further potential, now discounted earn-out cost of almost $19 million) was for QuayStreet to supply “Smartshares, in time, with an enhanced passive product offering”.
But Anna Scott, who heads the NZX funds arm now rebranded as Smart, said QuayStreet retains its active brief and operates as an “independent investment team” within the group.
Scott said any ‘enhanced passive’ product manufacture would fall under the Smart spectrum that spans index and ‘systematic’ funds “if there was demand”.
The QuayStreet active case has been buoyed by a solid performance run since joining the NZX that saw the manager named Morningstar KiwiSaver manager of the year for the last two years in succession as well as an INFINZ gong last month.
Stefan Stevanovic, QuayStreet head of international equities, said the INFINZ prize, in particular, highlights the importance of ‘risk-adjusted’ returns in assessing active managers.
The only INFINZ funds management award this year was judged on “strong risk-adjusted performance over the previous five calendar years and across diversified growth portfolio”, according to the finance industry body.
Stevanovic said the judgement period covered some of the most volatile markets seen in “recent history”, bolstering the manager’s confidence in its investment process.
QuayStreet includes top-down and bottom-up research into its portfolio construction with both strategic and tactical asset allocation in the toolkit.
While the SAA and TAA calls establish overall risk limits in the diversified funds, the team also has considerable discretion to adjust cash holdings in the underlying sector strategies.
Right now, for instance, the NZ and Australia share portfolios hold respective cash levels of 7 per cent and 12 per cent, according to QuayStreet head of Australasia equities, Xavier Waterstone.
The diversified funds have also benefited from running global shares unhedged for the last few years, although the firm has recently added a currency hedge of about 30 per cent.
Waterstone and Stefanovic form the equities side of the business with Craig Smith serving as fixed income portfolio manager while analyst, Schalk Keyter, rounds out the investment team.
But the small complement of investment specialists also helps the tight-knit team develop, share and critique portfolio ideas more easily than larger organisations, Waterstone said.
Nonetheless, QuayStreet is currently recruiting for three analysts – two covering equities and another in fixed income.
The manager lost two original portfolio managers – Andrew South and Roy Cross – soon after the transition to NZX hands.
Now in a more settled state inside the NZX building, Stevanovic said QuayStreet would look beyond its historical distribution relationships for growth.
Just about all of the $2 billion or so QuayStreet assets (including more than $710 million in its KiwiSaver scheme) has been sourced from the Craigs network.
While the Craigs links remain strong – in fact, the manager developed a couple of bespoke funds for the group last year – Stevanovic said QuayStreet was ready to get out more.