It was a good theory, and a nice name, but the boutique investment universe ultimately proved a little too lonely for Constellation Capital Management founder, Amelia Wong.
Wong shuttered her bespoke Auckland-based investment shop a couple of months ago after a four-year slog in the unforgiving world of wholesale funds management.
Set-up in 2014 as an ‘absolute return’ Australasian equities manager, Constellation was influenced by Wong’s experience working for a New York hedge fund.
“I wanted to give funds management a go,” she said. “And I thought if I don’t do it now, I never will.”
The business took a contrarian stance against, as the Constellation website describes it, a NZ market where “the largest funds are passive in style and give investors index-like returns and an impersonal investing experience”.
“We started Constellation because we want to offer investors something different,” the site says.
Wong said the fund was set up to target under-researched Australasian stocks along with the ability to short companies.
“You get alpha [in shorting] by finding companies with broken business models,” she said.
But New Zealand is not the same as New York. Wong cut her teeth in the US market with long-short strategies targeting ‘special situation’ stocks.
NZ inevitably offers fewer opportunities for sophisticated hedge fund strategies, however, she said the market is special in its own way.
“There’s a lot of lazy money,” Wong said.
Since 2014, though, laziness hasn’t been a bad investment strategy in a market where almost all stocks rose without much effort.
“[Constellation] didn’t do a lot of shorting,” she said. “There’s not much point shorting if everything keeps going up.”
Regardless, Wong said the fund, which raised over $6 million from wholesale investors, delivered respectable risk-adjusted returns to investors.
From inception in December 2014 until the end of August this year Constellation returned over 7 per cent per annum after all fees and expenses, with an average exposure to the share market of only 24 per cent. The website says: “For our investors, this means solid returns with less market risk.”
Despite stepping on the CBL “landmine”, as Wong says in a recent investor newsletter, Constellation was not fatally wounded.
She said the fund retained support from existing investors. And while $6 million is hardly a sustainable asset base – even for a NZ boutique – Wong said the figure was “on plan”.
“I always knew it would take a few years to establish – it was the same for other boutiques like Pie, Mint and Pathfinder,” Wong said. “But it was tougher than I thought it would be to run a fund by myself – doing everything from analysis to admin.
“It was a struggle on my own. I missed working with other people. And, at the end, I just wasn’t enjoying it.”
Moving to the collegiate atmosphere at the Craigs Investment Partners Auckland office has been refreshing, she said.
“There’s lots of talking here about investment ideas,” Wong said.
As a soon-to-be-authorised financial adviser (AFA) under the Craigs umbrella she will have direct contact with investors and reasonably wide portfolio management discretion.
In effect, Wong says many Craigs advisers operate as quasi-boutique managers with some looking after personalised portfolios totaling $100 million plus. Overall, Craigs manages about $16 billion, about three-times that of NZ’s biggest possibly-still-boutique fund firm, Milford Asset Management.
Constellation, meanwhile, is about to go dark. Wong said the wind-down was “in process” with the trustee set to return cash to investors.
