by David Chaplin and Greg Bright
Kapstream Capital, the active fixed income manager at the centre of the Janus Capital and Henderson Global Investors proposed merger, in Australasia at least, is expanding the group’s reach with a new deal in New Zealand. Despite rising interest rates, bonds are back.
The new fund is to be called the NZAM Kapstream Absolute Return Income Fund, being distributed in New Zealand by New Zealand Asset Management (NZAM) from April 3.
Kapstream, is the Australian boutique founded by Kumar Palghat, a former CIO in Australia at PIMCO Australia, and Nick Maroutsos, a business development manager there, in 2006. It became an owned subsidiary of Janus in 2015, leading the charge in alpha-seeking fixed interest strategies at a time when the world was starved for yield investments due to low-or-zero interest rates.
If the merger between Janus and Henderson goes ahead, which seems likely, Palghat will become the global head of fixed interest, flitting between Sydney, Newport Beach in the US and London.
Ironically, at least in theory, he will oversee his old PIMCO boss, the legendary Bill Gross, in his new role. Gross left PIMCO with some acrimony in 2014 and started a new absolute returns bond fund at Janus, which also has a big Newport Beach office – near where Gross, who allegedly hates to travel, lives.
According to Andy Morris, NZAM principal, the Kapstream absolute return philosophy chimed with the Auckland-based global multi-manager’s alternative approach.
Morris said the Kapstream fund would be a good fit for NZ investors looking for yield as conventional fixed income strategies came under pressure. He said with global interest rates on the rise and NZ term deposits unlikely to offer much respite for income investors, the time was ripe for an alternative option.
“For the same reasons the Kapstream fund has received widespread support in Australia, we think the timing is ideal for making it available to New Zealand investors” Morris said in a statement. “With an almost 10-year track record and positive returns delivered in 110 of its 116 month life, the fund has more than proven its ability both to preserve capital and generate a stable income stream – regardless of what’s going on in the world.”
The NZAM Kapstream product disclosure statement (PDS) says the fund has “an emphasis on investing in a global diversified portfolio of predominantly investment grade fixed income securities”.
“The strategy aims to generate returns that are superior to cash and cash-like securities while preserving capital,” the PDS says. Total cost for the new NZ Kapstream product would be 0.7 per cent, the PDS says, including the 0.4 per cent (plus GST) NZAM management fee.
NZAM would seed the fund with about NZ$20 million but Morris said he expected the Kapstream approach would appeal to a wide range of other NZ wholesale investors and advisory groups. He said the fund could fill the role as a cash/term deposit alternative as well as a replacement for more conventional fixed income strategies.
Janus and Henderson are hopeful of completing the merger in May this year.
– Investment News NZ, with Investor Strategy News.