People and Planet fund just the start of Karyn West’s plans for Apostle Funds Management
Karyn West has grown Apostle Funds Management to $5.2bn by personally investing is what she recommends, and now the boutique firm is launching a global carbon fund.
Karyn West will never forget the sage words of Mark Carnegie, one of Australia’s most celebrated venture capitalists and her long-time mentor.
As the global financial crisis was talking hold in 2007, he told her in trademark Carnegie lingo: “Darl’, batten down the hatches. This is going to be the biggest credit crunch I’ve ever seen.”
Carnegie was prescient as the GFC went on to wreak havoc across the financial world.
But it didn’t stop him backing West’s first independent business venture launched that year known as Apostle Asset Management, which acquired the Australian product distribution rights for French funds management giant Natixis.
The private equity buyout was backed by Carnegie and investment banking legend John Wylie’s Carnegie Wylie corporate advisory service, as well as a bunch of big names including former Qantas boss Geoff Dixon and advertising king John Singleton.
“I found Mark fantastic, he was very, very good at doing all the negotiations. I couldn’t have really asked for a better partner in that regard. I didn’t want to start a funds management business going into a GFC environment. Things were already starting to deteriorate during that period,” West now recalls.
“I battened down the hatches, we got through and there was no problem. Then once it was clear that the markets were on a firmer footing, I decided that I would buy Carnegie Wylie (which by then was owned by US investment bank Lazard) and the other investors out.”
Fast forward 14 years and West’s boutique firm – now known as Apostle Funds Management – has $5.2bn in assets under management and partners with international and domestic asset managers offering its clients capabilities across credit, global equities, multi-asset, private equity and real estate.
Its trademark has long been distributing to the Australian market unique offshore investment expertise that is difficult to find here.
She retains her links with Carnegie, sitting on the investment committee of his $1bn alternative investment manager MH Carnegie & Co.
“I’ve always got along extremely well with him. He’s somebody that really thinks outside the box. He thinks really differently to other people. I find him great to work with,” she says.
At Apostle, West is carving out her own niche in funds management by creating institutional grade ethical investing options focused on a commitment to climate action and gender diversity.
While Apostle has traditionally focused on marketing and distributing products, now it is launching its own.
West is determined to show that creating “positive real-world outcomes” is possible without forfeiting financial returns.
“What I’ve been really happy with is proving that you don’t have to give up returns to be ethical. If anything, I think we will probably outperform the benchmarks,” she says.
“Because what we are investing in is things for the future, not older economy things. What we are doing is the new economy.”
Backing yourself
West has always believed in backing herself.
She was one of six children and as soon as she finished high school, she moved out of home and studied at university part time while doing an undergraduate scholarship program with oil giant Shell.
She eventually secured her dream job with Rothschild Asset Management. But in 1999, as she contemplated starting a family, she reckoned that taking 12 months maternity leave and trying to return to the workforce could cripple her career.
“It was actually a fantastic place to work and there was no problem. But back in those days, there was just less flexibility for women coming back to the workforce after having a family,” she says.
She opted to leave the security offered by Rothschild to launch the Australian business of Loomis Sayles, the Boston-based investment manager owned by Natixis.
She deliberately negotiated a low starting base salary and a bonus arrangement based on success which allowed her more flexibility.
“We had a good conversation about why I was doing it and they were really happy to support me, to allow me to have that flexibility to have a family and to work for them,” she says.
She remembers a month after she had her baby, she could not travel from Sydney to Melbourne for an important client presentation. Instead her boss flew from Boston to Melbourne to do it for her and straight home again. He was on the ground for less than three hours.
“That early start when my daughter was very young was just so helpful in my career, so that I could stay working in the business and not lose a year or two, which I think is what causes a lot of women to not come back to funds management.
“Once you’ve been out for a number of years, it is actually quite difficult to get back in. If you’re in the investment world, or even in business development, your networks change, people move on, you lose the connections. It can be a reason that people don’t return,” she says.
Her daughter is now 22 and West says Apostle remains proudly female-led with a number of women in senior management.
Apostle also has an internship program that works with an external advice recruitment firm called Striver.
“I have a good network with women who I have worked with for a long period of time and we see really amazing women coming through that Striver program. But some great guys have also come through it too,” West says.
While some in the industry question the staff turnover levels at the firm and how hard the staff work, West says Apostle attracts people because of its boutique status and culture.
“They all like working for a small shop because they are not put into a big machine where they are doing low level work,” she says.
She still worries that the traditional glass ceiling remains in funds management, kept in place by issues like access to childcare.
“But the other issue is about who is doing the hiring and promoting. You need more women in senior management positions and on boards,” she says.
She believes the Covid-19 pandemic could prove to be a turning point.
“I think it is going to get easier for women because flexibility is now the norm for everybody,” she says. “But there’s still a long way to go.”
New horizons
Apostle in April launched its People and Planet Fund which has a hard exclusion policy for negative impact investments.
This means that all must have no direct revenue exposure to fossil fuel production, weapons and armaments production, gambling, alcohol and tobacco production, pornography or nuclear power.
It then screens potential investee companies for women in senior management and board positions, and removes companies that don’t meet its criteria.
The fund also invests in positive impact, including in Artesian’s Female Leaders venture capital fund in the growth alternatives segment of its portfolio and the Bailie Gifford Positive Change fund in global equities.
It took Apostle two years to design the People and Planet Fund, where 80 per cent of the investments are liquid.
“In Australian equities we couldn’t find a manger that had zero exposure to the areas we wanted to exclude. So we decided to build it ourselves,” West says.
The fund was initially seeded with $100m by Statewide Super – now owned by industry fund giant Hostplus – which is now fully invested.
“I think Statewide’s members are a fairly good indicator of what the values out there are,” West says.
“We use that as our good sample case – if that’s what’s important to those members, let’s build something that will pass most tests for other members and individuals.”
She says other financial advisory groups and family offices are now looking at investing in Apostle’s portfolios on behalf of wealthy investors, whose demands on sustainability have increased dramatically in recent years.
“For the family office clients, it is the second generation that didn’t necessarily make the money but are now managing the money. We see more of those people taking on ethical considerations,” West says.
“Some of the family office groups are very sophisticated and think differently to institutional clients. They are more in touch with the future of investing and across the decarbonisation issue. They also don’t have the shackles the super funds have.”
In the September quarter the People and Plant fund delivered a negative return of 0.18 per cent, compared to the negative 2 per cent return of its benchmark index.
“We want to bring on more investors over next 6-12 months. It is so diverse, it has a high number of asset classes and we can keep adding them and external managers,” West says.
In September Apostle also introduced a $50m ethically screened high yield credit fund, which West says will grow to have $150m in assets under management within the next 6 to 12 months.
The fund provides exposure to US alternative fixed income assets by investing in managers with strong track records in niche areas such as liquid infrastructure credit and private real estate debt.
Over 50 per cent of the portfolio is in floating rate bank loans and real estate debt and so far its performance has exceeded the high yield benchmarks.
The fund has a total return objective of 5-7 per cent net of fees over a rolling five-year period with a focus on achieving lower volatility than the broader US high yield market and on preserving investor’s capital.
She rejects suggestions Apostle is engaging in so-called “greenwashing” because all of its products are rigorously externally benchmarked and measured for performance.
The firm’s next step in its sustainability mission is to launch a global carbon fund, as prices in Australia’s $4.5bn carbon credit market look set to more than triple over the next decade amid soaring demand from the nation’s largest emitters.
The federal Labor government has pledged to cut emissions by 43 per cent by 2030.
A year in the making, the new fund – which will buy carbon offsets – will come to the market next calendar year.
“We are working with a couple of our institution clients to get that product seeded. It came out of building out our net zero pathway,” West says.
“We will be investing in five markets – California, the UK, Europe, New Zealand and Australia and looking at physical assets for those markets, and trading strategies where we can use futures to deal with the volatility.”
It will start with a minimum of $50m. As with all Apostle’s funds she recommends to clients, West will be an investor. She has always believed in the old adage: Put your money where your mouth is.
“The vision for our business is to be a really resourceful platform to our client base where they are looking for opportunities in the ethical investment space,” she says.
“I think there is going to be a lot of growth in these areas. It is the way of the future, to be taking environmental investments more seriously and getting more of them into our portfolios.”
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