New Star’s fund of funds team visit China and Australia

Mark Harris and Craig Heron, managers of New Star’s award-winning range of funds of funds, have recently returned from a fact-finding visit to China and Australia. Mark and Craig decided to visit China and Australia to gain first-hand insight into the links between the two nations and to research broader investment opportunities in the region. The trip was just one example of how Mark and Craig seek to add value for their investors. Mark and Craig used the trip to search for new opportunities and to implement a thorough review of existing investments in the region.

Mark Harris, head of funds of funds at New Star, says: “We have long supported the ‘stronger for longer’ view of the resource boom. Sell-side analysts have largely been reluctant to view this as anything other than a normal cycle, with an expectation that a supply-side response will soon be forthcoming to meet increased demand.”

A meeting with Oceanic Asset Management, a local boutique fund manager, was a prime reason for Mark Harris and Craig Heron’s visit to Australia. New Star’s Tactical, Asia and Active Portfolios took significant positions in Oceanic’s Australian Natural Resources Fund shortly after launch in July 2005. The CF Australian Resource Fund has returned 50.3% over the past year since inception and has consistently been ranked in the world’s top 10 unit trusts and OEIC’s by the UK’s leading fund research database, Trustnet†. Visiting Oceanic in Australia was instrumental in enhancing Mark and Craig’s understanding of the region. Their visit unearthed a number of themes and investment opportunities for their portfolios.

During the trip to Australia, two Oceanic co-fund managers, Stuart Bell and Elliott Rowton, organised meetings with twelve chief executives of mining companies in which their fund invests as well as a site visit to Jabiru Metals’ new Jaguar zinc mine near Leonora in Western Australia. Jabiru Metals is a major holding in the fund and has been a significant contributor to the fund’s performance.

Craig Heron says: “The Jabiru site visit was a real learning experience; it was professionally managed at all stages and revealed the complexity of such projects. We gained a number of valuable insights from meeting key personnel, including senior geologists and site managers. It was invaluable to experience the progress of the project first-hand.”

In China, Mark and Craig witnessed the country’s continuing strength in export and domestic industries by visiting companies in the infrastructure, motor manufacturing, property and steel industries. They were impressed with the depth of knowledge and global reach of the companies that they met.

Mark says: “We have been believers in China and the role of resources in its ongoing development. By witnessing the value chain in China and through the meetings with senior executives in Perth, it is quite evident that Australia will continue to play an integral role in China’s growth through the provision of natural resources. Our conclusion from these meetings is that the investment community continues to underestimate the supply constraints on the resources industry to continuing high levels of global demand. We maintain our belief that this will be a much longer cycle and that there are considerable opportunities still available to make good profits.”

Mark and Craig’s value-added approach to fund of funds management and their commitment to detailed and continuous research separate them from competitors and this has been reflected in the strong performance of their portfolios.

Mark says: “As fund of fund managers we have a host of analytical tools at our disposal to assist us in finding the right funds to invest in and the right fund mix. It is, however, equally necessary for us to know what is happening on the ground, how the underlying holdings of those funds are performing and how these companies are managed along with the opportunities and challenges that they face. The team at Oceanic for example has spent considerable time and effort setting themselves up as a high quality investment manager and have exceeded our every target”.

“Trips such as this help us to build a picture to reassess our portfolios, identify new trends and themes in regions and reposition our portfolios to best take advantage of all the investment opportunities available.”