Erin Kuo

Leading Independent Australian fund manager Yarra Capital Management (Yarra) is delighted to announce the appointment of Dr Erin Kuo as the Firm’s Chief Sustainability Officer.

Based in Melbourne, Dr Kuo brings more than 15 years’ experience working within sustainability. She will lead Yarra’s corporate sustainability and work closely with Yarra’s investment teams to support best practise Environment, Social and Governance (ESG) integration into the Firm’s investment processes.

Before joining Yarra, Dr Kuo ran a consulting business, advising fund managers and family offices on ESG matters. She was previously Chief Impact Officer at Impact Investment Group and held senior positions across Impact Investing Australia and Pacific Corporate Group, the world’s largest cleantech private equity investor, where she led projects in the US, India and Australia.

Dr Kuo has previously worked as a university researcher and lecturer on sustainability measurement and social impact, and has led projects on social enterprise and impact investing for the Victorian Government and the Responsible Investment Association of Australasia. Earlier in her career she worked as a financial advisor at Morgan Stanley, building and leading community development and environmental advocacy for non-profits in the US. Dr Kuo has a BA in Environmental Science from the University of California, a PhD from Monash University, and is a previous Adjunct Fellow at the Centre for Social Impact at Swinburne University.

Dion Hershan, Executive Chairman and Head of Australian Equities at Yarra Capital Management, commented:

“We are incredibly excited to be welcoming Erin to Yarra. There has never been greater focus on ESG and sustainability matters in financial markets, and Erin’s deep experience will significantly benefit the investment solutions and expertise we can offer to our clients.”

Dr Erin Kuo, Chief Sustainability Officer, added:

“I’m thrilled to have joined Yarra Capital Management to lead the Firm’s sustainability efforts. I am incredibly passionate about deepening positive impact for people and the planet and am excited to now be working with Yarra’s investment teams to build out our sustainability capabilities and tools.”

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Mr Eason will have oversight of Yarra’s day-to-day operations, and will be responsible for the delivery of Yarra’s strategic priorities. He will be based in Melbourne, and will lead the Firm’s senior management team.

Mr Eason is an accomplished financial services leader, bringing more than 20 years’ financial services industry experience. He was most recently Chief Financial Officer, Enterprise Services, at Commonwealth Bank of Australia (CBA) where he had financial accountability for the CBA Group’s digital, technology and operations functions, a division representing approximately 11,000 team members (new number). Since 2017, Mr Eason was also a Director of Colonial First State Investments Limited, the issuer of Colonial’s FirstChoice range of products.

Before becoming CFO of Enterprise Services in 2017, Mr Eason was an Executive General Manager at CBA, where he had overall responsibility for the bank’s global strategy function, working closely alongside the Board, CEO and Executive Leadership team. Before joining CBA in 2012, Mr Eason spent 14 years at Goldman Sachs, where he was a Managing Director and Co-Head of the Australian Financial Institutions Group (FIG), one of Australia’s largest and most successful FIG teams.

Dion Hershan, Executive Chairman, Yarra Capital Management, commented:  “In support of Yarra’s ‘client first’ approach, a key priority for the Firm post the recent acquisition of Nikko Asset Management’s Australian business was to appoint a Managing Director to lead and grow a larger and more complex organisation, one that now manages over $20bn of assets.

“Ed’s long and enviable financial services experience makes him the ideal candidate to take Yarra forward into its next phase of growth. He shares our long-term vision for the business, and we couldn’t be more pleased that Ed has agreed to join us.”

Edward Eason, incoming Managing Director, Yarra Capital Management, added:  “I’m incredibly excited to be joining Yarra. The business has an outstanding reputation for operational excellence, and I couldn’t be happier to be joining a team that is so well placed to continue to deliver for its clients. I look forward to working with Dion and the extended senior management team to help the business deliver on its long-term objective of becoming Australia’s most trusted independent investment partner.”

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Hideo Abe

Independent Australian fund manager Yarra Capital Management (Yarra) and global funds management group Nikko Asset Management Co., Ltd (Nikko AM) have announced that they have entered into a binding agreement through which Yarra will acquire Nikko AM’s Australian business.

Under the terms of the agreement, Yarra will assume ownership of Nikko AM’s Australian subsidiary, Nikko AM Limited, and its associated entities. The combination will create one of Australia’s largest independently owned Australian equities and fixed income fund managers.

The transaction, which remains subject to certain regulatory approvals, is expected to close in April 2021. Following completion:

• Nikko AM’s Australian equities business, comprising an 11-person investment team that has worked together for more than 15 years, will be rebranded which will see a return of the Tyndall brand. The Tyndall franchise will be led by Brad Potter (Nikko AM’s Head of Australian Equities) and will remain separate to Yarra’s style-neutral Australian equities business, with no crossover in investment management activity and no change to its value investment philosophy, process or team;
• Nikko AM’s Australian fixed income business, a highly regarded franchise with 15 years’ experience managing assets for a diverse range of local and offshore clients, will be combined with Yarra’s growing fixed income operations. The new business, which will benefit from a significantly broadened capability, will be jointly led by Roy Keenan (Yarra’s Head of Australian Fixed Income) and Darren Langer (Nikko AM’s Head of Australian Fixed Income), as Co-Heads of Australian Fixed Income;
• Dion Hershan, currently Yarra’s Managing Director and Head of Australian Equities, will become Executive Chair and Head of Equities (Yarra). In his new role, he will devolve all day-to-day management responsibilities. A search for a new Managing Director to lead the combined business has commenced, with an appointment expected to be confirmed in the coming months. Until then, Garvin Louie will serve as Interim Managing Director. Garvin is Yarra’s General Counsel and currently leads the Firm’s Business Operations function;
• Nikko AM will become a 20% shareholder in the enlarged group and will appoint one director to its Board, while Michael Gordon (Non-Executive Director, Yarra) will join Tyndall’s Board as Chairman;
• All existing Australian clients of Nikko AM Limited are assured of a seamless transition to the new organisation;
• The partnership will benefit from an enhanced product suite, with Nikko AM’s global business gaining access to Yarra’s Australian equity and fixed income products, and Yarra assuming responsibility for the distribution of Nikko AM’s global suite of products in the Australian market.

Commenting on behalf of Yarra, Dion Hershan said: “The combination of these two outstanding franchises will create one of Australia’s largest independent fund managers, with approximately $20 billion of assets under management. The transaction will enable us to continue strengthening our partnerships with clients and will provide the additional scale to support greater investment in talent, technology and operational excellence.

Yarra was attracted to the quality of the people within Nikko AM’s Australian business and we are delighted to welcome them into the Yarra team. We are also extremely pleased to bring Nikko AM on board as a strategic investor alongside TA Associates. This partnership will help us expand the global reach of our investment strategies, in particular in Japan where we have achieved significant growth in recent years.”

Commenting on behalf of Nikko AM, Nikko AM President and Co-CEO, Hideo Abe, remarked: “This partnership takes our commitment in Australia to the next stage. We are confident that our investment in Yarra will be the catalyst to enhance the capabilities that Australian investors are looking for, while sales, distribution and back and middle office functions will complement each other and thus continue to provide quality service to our clients. We are also excited to be able to expand our Australian equity and fixed income product offering to Japanese and global investors in this new capacity.”

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Despite an encouraging valuation level for the broader market, the team believes in a targeted approach given the uncertainty that exists locally and globally. 

Outlining the key themes to emerge in Australian equities over the period the Goldman Sachs Asset Management Australian Equities team has identified an excessive focus on ‘yield at any price’ as a cause for concern, which has potential to unwind. While overall results largely reinforced the team’s sector ratings, a significant change was to exit most holdings in the REIT sector. 

“The number of companies who missed expectations, was broadly in line with the long-term historical average, with the bad news having been broadly factored in,” said Dion Hershan, Head of Australian Equities at Goldman Sachs Asset Management. “Despite this the reality is that there are a number of cross currents buffeting the Australian economy and we believe that a targeted approach is required to identify value.” 

The Goldman Sachs Asset Management team consists of 10 analysts, eight of which are sector specialists. It manages $2.8 billion on behalf of Australian institutional and individual investors. The team adopts a long-term, active, research-driven approach to managing domestic equities which includes more than a thousand meetings with Australian companies per annum. 

“There are a number of themes playing out in the market at the moment,” Hershan said. “On the positive side interest rates are falling, balance sheets have largely been strengthened, although a few weak outliers persist, and sectors exposed to higher growth regions have been resilient.” 

“On the negative side most companies are experiencing cost pressure, low productivity and the impact of a strong Australian dollar. Miners in particular are facing rising input costs, and lower commodity prices with a negative flow on effect for investment in new projects. Perhaps unsurprisingly companies are also being reticent about providing guidance which we think is a function of lower levels of confidence in uncertain markets.” 

“As a result of this uncertainty, many investors have become pre-occupied with yield and so-called ‘safe haven’ stocks,” said Hershan, “We have a strong view that ‘yield at any price’ is a flawed concept, and without valuation support, an unwind is likely. Over the long term we prefer to focus on the total return of an investment, with capital growth being critical in addition to yield.” 

“We believe that there is value to be found at the moment but you have to be extremely selective to find it. You can’t rely upon an economic recovery or normalization across the board, at least in the short-term. We are focused on identifying companies we believe can thrive irrespective of the operating environment, whether that be through organic growth, quality of the management team, or through control of the cost base and productivity gains.” 

“From an overall sector perspective the results season largely reinforced our key positions. We remain underweight metals and mining, insurance and telecoms. By contrast to our position on resources we are overweight energy. That’s a reflection of our view on energy prices and the level of confidence we have on some of these LNG projects progressing to market and delivering against return targets. We are also overweight transport where we see opportunities for increased productivity and efficiency, and banks which we think remain stable and resilient and which offer strong total returns.” 

On the team’s position on REITs Hershan added; “We were an early re-entrant back into REITs in 2009 with a view that balance sheet issues had been addressed, the underlying properties were performing well and the steep discount to asset backing was unsustainable. The valuation opportunity has largely played out and headwinds are emerging for property fundamentals with regard to rental growth and vacancies, given the broader economic environment. With the risk/reward now unfavourable we have moved to a significant underweight position.”

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