Rothschild shakes up investment

Rothschild has shaken up its investment process for the first time in its 20 year history in Australia. Stuart Engel and Kate Kachor take a look at the group’s new multi-style approach.

Rothschild has shaken up its investment process for the first time in its 20 year history in Australia. Stuart Engel and Kate Kachor take a look at the group’s new multi-style approach.

Rothschild is a company steeped in tradition. Its European family founders have amassed a substantial wealth since Mayer Amschel Rothschild sent his five sons to establish banking and trading houses throughout Europe in the late eighteenth century.

So it is not the type of company to dramatically change its direction overnight just for the sake of it. This is probably why Rothschild’s Australian managing director Peter Martin refers to the group’s recent shift in investment strategy as a “step changing process” and “not earth shattering”.

But it certainly is a major change in the way Rothschild will do business in the fu-ture. For the first time, it will begin to offer managed funds which do not conform to the value process which has underpinned the asset management group’s invest-ment style in Australia for about 20 years.

A value style investment manager concentrates on price to earnings ratios of shares to buy when shares are underpriced and sell when they appear overvalued. It is of-ten contrasted with a growth style investment manager who concentrates on the potential earnings growth of shares in its buying and selling decisions to maximise capital growth rather than income.

Rothschild will continue to offer the value process to investors and there will be no changes to existing funds. However, Rothschild will also soon be offering interna-tional equities funds with a growth style and may launch Australian equities prod-ucts with a growth bias further down the track.

Martin says the Rothschild will either look to hire its own growth investment team or will rebadge a fund managed by a boutique fund manager who uses a growth style.

Rothschild’s role, Martin says, is to bring “the best of breed” investment products.

“Rothschild will continue to manage its existing range of value-orientated products true to label and deliver to their promised style,” he says.

“We believe our clients require a variety of investment approaches to meet their needs and consequently we will be offering them a broad and deep product suite to choose from.

“I would like to emphasise that all our products — now and in the future will be true to label and deliver their promised style. That is, if a client chooses a product with a particular style bias they can be sure their investment is being managed in the manner described”.

Martin insists the change in direction is not driven by the recent bad run by value funds after a decade of outperforming growth funds. In the year to March 31, value stocks lost 1.4 per cent, while growth stocks gained 16.8 per cent.

Rather, he says the idea was inspired by the success of its partner in international investments, Putnam Investments.

Putnam offers US investors three distinct investment styles — value, growth and core (style neutral). Each strategy team operates independently to offer clients a full range of investment styles.

“There is a central pool of analysts for each of the style teams to draw from. Each style team in turn has its own analysts to research very particular stocks for tyheir portfolios. The chief financial officer monitors each of the style to ensure they re-main true to style by assessing performance against their style peers,” Martin says.

Martin says the strategy has helped drive Putnam to the top of managed funds in-flows in the US on its way to amassing $US415 billion under management.

Rothschild also announced the launch of the Discovery range of international eq-uities products which will be managed by Putnam. Putnam has also taken over Rothschild’s $900m million in international equities.

Martin has also flagged the introduction of a multi-style hedge fund product to be launched in October this year.