July 28, 2021
By CLIONA O'DOWD, JOURNALIST EXCLUSIVE 8:18PM JULY 4, 2021
The perfect time to launch an investment management firm, according to Guy Hedley, is when markets are overvalued. And so, with many markets scaling record highs, the former Macquarie Private Bank boss is following through on an idea he has been mulling for decades.
“I’ve been thinking about this all my financial services life,” he says. “I built my private bank business in Macquarie on this model. When I stepped away from Macquarie and built a standard funds management business, I kept thinking to myself, why is nobody doing this?
“In the meantime the private banks got stronger and the asset managers continued to do their thing. So we just figured now’s the time.”
Sydney-based Hedley, alongside former Macquarie Bank chief investment officer Craig Swanger, is launching Stoic Asset Management, a new investment shop that brings together the investment adviser and asset manager roles.
This “design house” approach will fill a gaping hole in the market, he says.
“In my private bank days we’d have clients approach us asking how they could get a risk-adjusted return across a portfolio of assets. That’s still what happens in the market every day if you go to Macquarie Private Bank, or Credit Suisse, or Morgan Stanley. “They then go up the food chain and try and find suitable products that they can mix and match back to the investor.”
There is a disruptive element in not having to do that in two separate areas, he says.
“Why do you need to have an investment adviser and a funds manager doing that when you can, effectively, given the technology that’s available and the range of assets that are out there in the market, put it all together in one place?”
Stoic Asset Management is launching with $500m in funds under management across a range of funds and the veteran bankers will use their “Rolodex of relationships” to partner other asset managers on the best investment opportunities.
This way they get the best ideas from multiple avenues, according to Hedley.
“Asset managers tend to view themselves as fully self-contained units. They say ‘I’ve got my own investment team and my investment team have got the greatest ideas in the world’,’’ he says.
“Of course that’s just not true. The best ideas and the best brains actually exist in multiple shops around Australia and around the world. It’s a bit arrogant to say that you can access it all in one place.
“We figured, why don’t we just go out in each category, whether it’s property, ETFs, small cap stocks or micro cap stocks. Let’s just go get back together with people we’ve worked with previously, and just run partnerships.”
The tie-ups with other funds will see Stoic mix and match the investment opportunities on offer from its various partners.
In property, it will link up with ASX-listed Elanor Investors Group, with Hedley and Swanger having previously invested with the company in direct assets including commercial properties, shopping centres, hospitals, hotels and even wildlife parks.
Bond and equity partnerships include bond specialist FIIG, which Swanger joined in 2013 when he left Macquarie, bond ETF manager Australian Corporate Bond Company and small cap manager MicroEquities.
On the venture capital side, it will partner with Hedley’s Stoic Ventures, an early-stage venture capital firm specialising in university R&D commercialisation funding.
It will also partner with Hedley’s Atlas Advisors Australia, one of the biggest funds managers of Significant Investor Visa capital, mostly from wealthy Chinese.
With bond and equity markets at inflated levels, real assets and venture capital will generate the best returns in the coming years, Hedley predicts.
“Core stable property-based assets which have predictable cashflows — that’s a no-brainer.
“And the more innovative venture capital, where there’s a huge amount of money going to technology and life sciences, but it’s still an under-invested market. In early-stage venture capital in Australia there’s just a shortage of capital. Universities now don’t get well funded. They can’t afford to put the same amount of money into R&D. So there’s a whole lot of innovation there.”
Stoic’s target client market is investors with $5m to spend, including migrants on the Significant Investor Visa program, wealthy individuals, family offices and charities and other endowments. It will only take a management fee when investors get their preferred return, but its partners managing physical assets may charge an asset management fee.
Micro equity investing, meanwhile, will be done by the fund on a needs basis, Swanger says, with investors coming in on the (SIV) program required to have an exposure to ASX-listed companies.
Investors will also benefit from separating capital and income assets in the current market, he adds. “At certain times in markets, you can really ramp up on asset valuations, and we’re in one of those times right now.
“There may well be good reasons for that to last for a while but certainly the risk on the capital price side of assets is much higher right now than the risk on the income side of assets. So this is one of those times where it does make a lot of sense to separate income from capital, where it suits investors,” he says.
As investors become more perplexed about where to invest their money, Hedley warns that the current environment will not be a short-term challenge.
“Everyone understands that asset markets are inflated. Everyone knows that. And if you invest your hard-earned savings in bonds, government bonds, you get 1 per cent. Why would you do that? And we think this is not a cyclical thing. This is very structural. It is going to be a long 10- year plus horizon before you get normalised markets,” he says.
CLIONA O'DOWD, JOURNALIST
Cliona O’Dowd joined The Australian in 2016 and writes on financial services. She was previously the editor of business news and commentary website Business Spectator.
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