LSV to restrict retail offering
US fund manager LSV has stated that it will not launch another Australian fund once its initial offering has been completed.
Speaking exclusively to Money Management, LSV chief executive officer Josef Lakonishok said the LSV Australian Value Strategy Fund would be capped at $1 billon, with the decision made in line with LSV’s US-based funds.
“Many of our US funds are now closed to new investors, although existing clients can still invest in the funds,” he said.
Lakonishok said in the US there were outflows, due to a variety of investment decisions by clients, so there was always room to allow more money into a fund, while allowing it to remain at about the same cap.
LSV has a number of Australian investors, mainly institutional, and he said the reason for launching an Australian fund was based on demand for local product from these clients.
The Australian fund is available to retail investors through Strategic Capital Management.
LSV uses a value investment style and has a contrarian approach to stock selection.
Lakonishok said stock selection principles are based on using the staff’s academic background research on investment styles over a number of years. “We use a quant model to look at stocks that are under-performing or are unloved by the market,” he said.
“We conduct our own research into the companies and we don’t talk to analysts or make company visits.”
Lakonishok said when selecting stocks, the fund manager didn’t make predictions on the future growth of an asset.
“We try to be objective when looking at a stock and all our research is blended in to make a decision on whether to put the stock in the portfolio or not,” he said.
In the US, LSV holds around 100 stocks in a fund to get a diversified spread. The Australian fund will hold about 35 stocks, mainly from the ASX 200, but also including some smaller cap stocks.
Lakonishok says holding more stocks would mean the fund manager would start to replicate the index, and his company’s aim is to outperform.
Since inception in January last year, the Australian fund has achieved returns of 18.4 per cent. This compares to the ASX 300 index return of 20.1 per cent for the same period.
Lakonishok argues that investment returns should be based on comparing managers with like investment styles. “In the US, we are compared to other value managers, however people are not so sensitive on how you rate as long as you are outperforming,” he said.
The US LSV Global Strategy Value Fund, which is available to retail investors in Australia through ipac, has one year returns of 20.8 per cent compared to 17.4 per cent on the MSCI world value index.
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