Lonsec has rated Equity Trustees Limited’s (EQT) Australian equities fund, the EQT Wholesale Flagship Fund, for the first time, giving the fund a ‘Recommended’ rating.
In its report, Lonsec made particular reference of the stability and experience of the EQT team, led by Shaun Manuell; its risk management process; and the fund’s long-term performance; as reasons for the high rating.
The report said: “A positive feature of the Fund’s historical performance has been the observed levels of absolute volatility (as measured by standard deviation) being consistently lower [than its peer group].
“Lonsec believes the EQT research process is well structured and consistent with the objective of uncovering the long term value drivers of a company. Lonsec draws additional comfort from the heritage of the application of the EQT process, having not changed since 2003, and its foundation in conservative style funds management.
“EQT believes that the Australian equity market is a distinctly concentrated universe through sectors and style. Therefore EQT considers performance to be difficult to deliver by adhering to a single style through all market cycles and that holding a concentrated number of positions avoids over diversification. Lonsec is supportive of this understanding and believes the philosophical and portfolio construction responses to be a pragmatic initiative to avoid the potential negative characteristics of the Australian equity market.”
The report also noted that Mr Manuell is “a well considered leader and capable investment professional” and “the team is of good quality and well experienced.”
“EQT team members are subject to psychological assessments prior to joining, while in isolation this is not unique, the characteristics EQT is seeking are. By undertaking this expansive process EQT is able to ensure its team members are well aligned to the objectives of the Fund and needs of investors. This places the EQT team at a distinct competitive advantage by ensuring alignment of all staff prior to joining.”
EQT recently introduced a change to the fee structure for the fund, offering the option of an alternative fee structure with a flat MER and a performance fee of 20% for outperformance of the S&P/ASX200 Accumulation Index.
Lonsec also rated this approach separately as ‘Recommended’, noting that the EQT fee of 0.72 percent is “one of the lowest in the assessed Peer Group of low-Tracking Error, low- outperformance target designs.”