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Gibbs-Harris up 64% on MSCI since launch

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While New Zealand fund managers gave up trying to pick international stocks themselves years ago, Mike Gibbs-Harris, former chief investment officer with Colonial First State NZ, is bucking the trend and is running a US dollar-denominated international share fund from Wellington, mostly for Asian and European high-net worth clients. He stresses the fund’s offer documents aren’t registered in New Zealand and he’s not promoting it here.

Gibbs-Harris started the fund, initially for his own investments, back in late 1999. Then in January of this year, he converted it into a managed fund - a “Cayman Islands Professional Fund” with HSBC Trustees acting as custodian - for high-net worth investors resident offshore. Since its launch, the fund has so far attracted around $5 million. “Most people raise a bundle of capital and then set up a fund. I’ve done it the other way,” he says.

While he also would like to run institutional or pension fund money, he says he doesn’t yet have a long-enough track record for the asset consultants who are responsible for advising trustees. Plus, because the composition of his fund will often be very different from the MSCI’s, its tracking error may be an issue for them. “We tend to have low levels of absolute risk, but high tracking error [from the MSCI],” he says.

His performance results bear that out. For the three years to 31 March he has outperformed the MSCI by 64%. On an annualised basis, his returns have been 7% with 4% standard deviation against the index’s –14% and standard deviation of 8.6%.
Gibbs-Harris says the fund has an “absolute returns” focus. While he endeavours to outperform the MSCI, his primary objective is to deliver absolute rather than relative returns.

He describes his investment style as “taking a macro-approach with a value bias.” It is very much a top-down fund with Gibbs-Harris looking for markets where equities are reasonably priced, in particular relative to bonds – “all investments are compared to the risk-free rate,” he says. He then looks for good buying opportunities in those markets.

The fund is currently invested in around 40 stocks spread across 12 markets, including New Zealand, Hong Kong, Sweden, Austria and Switzerland. It is also 15% invested in bonds: 5% in Australian index-linked bonds and 10% in Swedish bonds.

While New Zealand is furthest away from most places, Gibbs-Harris says it is possible to run global money from here, largely thanks to the internet – but adds it probably wouldn’t have been possible five years ago. While he does have to travel more than if he were based in the USA or London, he says he’s not constantly travelling. However, there are compensations for the extra travel, he says. New Zealand is a relatively cheap country to live and do business in, and not being based close to the main global markets makes it easier not to have geographical biases.

“ You can make very dispassionate decisions here,” he says. “Less than 0.1% of the world’s market is here. Everything is offshore.”

© 2003 financial alert Limited. (Used with permission)

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