Losses turn ugly for top boutique funds

Australia’s most successful boutique fund and asset managers have suffered big profit falls and falling dividends.

Peter Cooper, MD and CIO at Cooper Investors. Picture: Hollie Adams

Australia’s most successful boutique fund and asset managers have suffered big profit falls and falling dividends as a volatile market took its toll on their financial results.

The accounts of the privately owned firms, some of which are controlled by rich-list members and others by little-known portfolio managers, reveal the net profits of 10 firms fell by 10 per cent in 2019.

Some defied the tougher times on the market. Firms controlled by prominent fund managers such as Peter Cooper, Anton Tagliaferro and David Paradice were among the big earners, though there were some little-known names that paid themselves huge dividends.

Ashok Jacob, the founder of Ellerston Capital and a respected name in the investment market, recorded a net loss in 2019, accounts for his company showed.

Ellerston Capital, backed by billionaire James Packer, suffered a $2.2m loss for the 12 months to June 30, after making a net profit of $2.98m in the previous year.

Performance fees for Mr Jacob’s firm fell from $11.6m in 2018 to only $558,900, while management fees fell about $2m to $29m.

Ellerston has faced some investor backlash regarding its listed investment company Ellerston Global Investments, which has been trading at a discount to its net tangible assets. Mr Jacob said earlier this month he was “not prepared to tolerate the discount” and was restructuring his LIC into an unlisted trust.

His private investment company Ellerston paid a $1.48m dividend for the 2019 financial year, down from $3.32m a year ago.

Elsewhere, prominent fund managers such as Paradice Investment Management, Vinva and Greencape Capital all recorded profit and revenue falls.

David Paradice’s eponymous firm had its revenue drop more than $50m in the year to finish at $85m. Though his firm’s profit fell from $55m to $38m, the result was still the biggest among the boutique fund managers.

Mr Paradice has opened a new Paradice Emerging Markets Fund, run out of San Francisco by recruits Edward Su and Michael Roberge. The fund started in May and has already recorded a 15.13 per cent return, outperforming the MSCI Emerging Markets Index by 5.36 per cent in that time.

Peter Cooper, another member of The List — Australia’s Richest 250, received the bulk of the $28m dividend his firm paid after recorded a $4m increase in revenue to $29.5m for 2019.

But David Pace and Matthew Ryland’s Greencape saw its revenue fall from $62m in 2018 to $39m, while profit fell about $12m to $20m.

Greencape paid its founder shareholders a $32m dividend, up from $19m last year. The firm garnered performance fees of only $137,877 in 2019, compared with $28m a year earlier.

Another firm to suffer a revenue and profit decline was Vinva, a quant-driven fund which keeps a low profile but manages money for some of Australia’s biggest funds.

Established by a team led by managing director and head of equity investments Morry Waked after he left BlackRock in 2010, Vinva had about $28.7bn in funds under management at June 30, according to its financial accounts. Only $973,360 of that was in global stocks. The group oversees a combination of active long-only and long-short strategies.

Vinva paid Waked and his shareholders and management team, including ex-Blackrock employees Nick Burt and Andrew Jackson, dividends of $31m in November last year in relation to its 2018 financial year, down from $49m the year before. A decline in performance fees contributed to a net profit fall of about $4m for 2019 to almost $27.2m.

Paul Moore’s PM Capital also suffered a net profit fall, though Maple-Brown Abbot and Investors Mutual were among the firms to enjoy profit rises.