Mr Kordick has 12 years industry experience and joins EQT from institutional asset consultant Frontier Investment Consulting, where he was an investment analyst. In this role, he was responsible for overseeing portfolio construction and investment strategies, investment processes and performance. He has also worked as an equity analyst at Diogenes Research. Michael holds a bachelor of commerce from the University of Melbourne, a masters in applied finance from Macquarie University and is also PS146 compliant.

Mr Doan has joined from boutique asset consultant Atchison Consultants, where he was an investment analyst responsible for quantitative analysis, manager selection and portfolio construction. He holds a bachelor of business (honours) degree in economics and finance from RMIT, and a master of finance from the University of Melbourne and has passed all three levels of the CFA Program.

Mr Boubouras said that the two appointments further expand the Australian equity capabilities of the EQT investment team, providing additional support to the CIO and head of equities.

“The appointments of Michael and Thi to the team will help ensure we have the resources and expertise in place to take the next step in the development and growth of EQT’s funds management capability.

“The EQT equities team now includes two portfolio managers and four investment analysts, and we intend to continue to add to our asset management capabilities as the right opportunities develop,” Mr Boubouras said.

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EQT made the decision to partner with an external asset consultant to help ensure it maintains consistency in its asset management and risk management activities across its retail and institutional business units, and to assist in meeting its legislative and regulatory obligations.

Robin Burns, managing director of EQT, said that Mercer was selected following an intensive review process.

“Mercer met our strict criteria for delivering asset consultant services, including providing quality research and product recommendations, reporting and monitoring in line with our prudential obligations, and having the breadth and depth of resources, including people and technology on a global scale, to meet the needs of both our institutional and retail businesses.

“The board took the view that Mercer is best placed to assist EQT in achieving industry best practice and further enhancing the services we provide to all our clients.

“In particular, Mercer will work closely with George Boubouras in our newly created CIO role to help deliver consistent returns across all mandates,” Mr Burns said.

For EQT’s institutional business, Mercer will provide assistance and guidance to EQT’s board investment committee including strategic asset allocation advice, reporting and monitoring, and portfolio construction recommendations.

The EQT retail business partnership objectives include: investment research and approved product list construction; model portfolio construction; and adviser support.

Mr Burns said that Mercer demonstrated an in-depth understanding of EQT’s strategy, needs and fiduciary obligations, and therefore the need to provide consistency and rigour across all EQT business units.

“As a trustee company with a 125 year heritage, we take our trust and fiduciary responsibilities very seriously and Mercer showed that it could satisfy our stringent requirements in these areas,” Mr Burns said.

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Dr Kasian has over 25 years financial services experience in asset management and senior executive roles, and joins EQT from Accordius where he was executive director and chief investment officer.
 
He has also worked at First Samuel as chief investment officer, and has held various senior roles at HSBC Global Asset Management including chief investment officer and head of equities where he was in charge of a large investment team. Dr Kasian was also appointed head of the global financials equity team overseeing large global equity mandates. 
 
In 1995, he co-founded Wallara Asset Management and he also pioneered the “Cash Flow Return on Investment Valuation” technique currently used by a number of major fund managers, including EQT.
 
Mr Boubouras said that Dr Kasian’s high-level investment experience and strategic capabilities will be a valuable addition to the EQT asset management team.
 
“Paul is a highly respected and experienced wealth management professional and his appointment is the next step in the further development and growth of EQT’s funds management capability.
 
“Paul and I worked together in the past at HSBC Global Asset Management as part of a very successful asset management team, and I am particularly pleased to be able to appoint someone of his calibre, experience and track record to the Equity Trustees team.
 
“He has a long history of successful Australian equities management, delivering strong investment performance for investors through different market cycles, and also has significant experience in team management and leadership,” Mr Boubouras said.

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Andrew Seaman, fixed income portfolio manager at Stratton Street, said unlike index-based bond funds that buy most from those that issue most bonds – which means from the most indebted – Stratton Street is a value investor in bonds.
 
“People expect global bond markets to price securities efficiently, but that is not the case. We find there are bonds that have substantially higher yields but the same or lower risk profile compared to others. We can buy these and wait until the market realises where the value is, giving us a higher income and strong capital gain potential.
 
“This way our approach also removes some of the risk that is inevitably carried by funds which rely on weighting.
 
“Over the past few years, we have seen the effects of unsustainable debts around the world, as once highly-rated countries like Greece and Iceland turned out not to be as safe as investors assumed.
 
“The net foreign asset position of a country is an essential component in our investment process and the Fund does not invest in countries with liabilities greater than 50 percent of GDP, regardless of their index weighting or supposed credit rating.
 
“The fund invests in issuers that Stratton Street believes can sustain their debts and pay investors back.  This results in us focusing largely on investing in the high growth creditor nations of Asia, such as China, Singapore and South Korea. These countries have enough overseas assets to pay back their foreign debt and they are borrowing to invest in their long term growth.
 
“By holding a portfolio of good value, quality bonds that are hedged into Australian dollars, investors in Australia will have little volatility but higher potential returns than domestic securities.”
 
Mr Seaman said that Stratton Street sees Australia as a particularly attractive, sophisticated investor market, with a strong regulatory approach.
 
“Appointing Equity Trustees as RE makes it easier for us to market products in Australia as it is a long established institution offering a high level of support and a very competent distribution network.
 
“It means that we can avoid the problems and costs of setting up administration and distribution in our own name from the outset.”
 
The fund is primarily suited to investors seeking an alternative to, or diversification from, traditional fixed income strategies.  It has a recommended minimum investment time frame of five years and the minimum initial investment is AUD$1,000,000 (lower if through an Investor Directed Portfolio Service (IDPS)).
 
The net foreign asset position of a country is an essential component in the investment process and the fund does not invest in countries with liabilities greater than 50 percent of GDP, regardless of their index weighting or supposed credit rating.
 
The fund seeks to deliver long term appreciation for investors through a combination of capital growth and income, through exposure to investment grade securities that Stratton Street believes are undervalued.  It will also use derivatives such as forward foreign exchange contracts in order to hedge non-Australian dollar exposure.

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The appointment is on an interim basis pending the outcome of EQT’s takeover offer for The Trust Company (TCU).
 
Mr Boubouras joins EQT from UBS Wealth Management where he was head of investment strategy and consulting, responsible for research & investments across all asset classes.
 
Prior to this, Mr Boubouras was with Macquarie Bank and he has also worked with HSBC Asset Management, Challenger Financial Services Group, and Westpac as well as NSW Treasury.
 
Mr Boubouras holds a bachelor of economics, hons, from Flinders University in Adelaide.  He has undertaken further professional development in management and financial services including: an executive certificate in management & leadership from Massachusetts Institute of Technology (MIT); an investment decisions & behavioural finance program at Harvard University; and the Securities & Derivatives Industry Association accreditation (PS146 accreditation).
 
Robin Burns, managing director of EQT, said that Mr Boubouras’s experience and background is particularly appropriate for EQT as it enters a new period of growth and development.
 
“We have recently put additional focus on our wealth management business, strengthening the management team and adding services that are relevant both for our own clients as well as the broader financial planning industry.
 
“Adding a CIO with broad funds management experience enhances our capability in an important area,” Mr Burns said.

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In this new role, Ms Foster will be responsible for all EQT’s advice services including its aged care advisory and placement businesses, corporate superannuation advice, and personal wealth management.
 
She has over 20 years experience in the financial services sector, working in distribution and marketing roles at organisations including TOWER Australia, Suncorp, CBA and Colonial Limited. Most recently, Ms Foster ran a business consulting and change management company for the financial services industry, 4Quadrant.
 
Geoff Rimmer, head of EQT private wealth services (PWS), said that Ms Foster’s experience and skills will assist in bringing together the wide range of specialist areas that PWS operates in, so that it offers one advice model to clients and partners.
 
“EQT is positioning itself to ensure it is fully compliant with the new Future of Financial Advice (FOFA) reforms, as well as helping other financial planning organisations meet the ‘best interest’ and ‘know your client’ requirements of FOFA.
 
“In particular, Julie’s background in business development and transformation, and focus on client engagement, will be extremely valuable in helping EQT with its business growth plans.  These include working more closely with financial planning groups to provide specialist support and assistance in the post-FOFA environment,” Mr Rimmer said.

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Offer highlights

• 33 EQT shares to be offered for every 100 TRU shares [1]
• Values TRU at $5.28 per share based on the EQT share price before the offer was announced
• 11.2% premium to TRU share price before the offer was announced
• 13.3% premium to average TRU and EQT share prices over the past 1 month
• Estimated to generate up to $8m p.a. of synergies by end of 2014
• TRU shareholders will own approximately 59% of the Combined Group and participate proportionately in gains from consolidating the two organisations
• TRU shareholders retain up to 17 cents dividends per share under the Offer
• TRU shareholders may qualify for EQT’s FY13 final dividend
• Share-based offer may provide rollover relief from CGT
• Fulfils a long-standing corporate opportunity for consolidation and efficiency gains.

Mr Tony Killen, Chairman of EQT said, “Combining Equity Trustees and Trust Company has been identified as the best available corporate transaction for both companies. We strongly support this view. Discussions between the two companies have been held formally and informally on a number of occasions without success. The Offer will provide the opportunity for Trust Company shareholders to decide the matter.”

Mr Killen added, “This is an exceptional opportunity for shareholders in each company. The benefits for each company’s investors, many of whom are long-term and very loyal, are highly attractive. Both groups of shareholders will access the upsides that can be realised by the combined group. Clients and employees will also benefit from being associated with a larger, more diversified organisation with deeper resources, broader scope and a wider range of high-quality services.”

[1] The Offer will express the Offer consideration as 0.33 EQT shares for every TRU share.

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The Fund is managed by ASX listed Equity Trusties Limited (ASX:EQT) who has in excess of $20 billion dollars in funds under management.

EQT’s process seeks to derive stable returns with predictable quarterly income derived from a diversified pool of real estate mortgages, aiming to outperform the RBA Cash rate on a rolling three-year basis.

Zenith’s View

Zenith sees the Fund as representing a good choice for conservative investors seeking a stable quarterly income stream.

The Fund operates under a highly conservative lending regime, which is somewhat contradicted by the broadly competitive rates at which it lends, which would normally be associated with higher risk lending. EQT’s loan pricing power is based on clients paying a premium for the level of service and relationship management imparted by EQT.

The Fund managed to avoid the issues which have plagued the sector since 2008, liquidity issues and declining credit quality. This is attributed partly to their traditional investor base which has been mainly sourced from existing EQT clients minimising exposure to ‘hot money’ flows seen in the wider marketplace.

The Fund’s performance over the long term has been solid and consistently a first quartile performer in its peer group. While there have been periods where the Fund has lagged in environments where interest rates move upward quickly, this is generally an inherent characteristic of mortgage funds with a weighting to fixed rate mortgages. Given EQT sees itself as a fundamental long-term investor who seeks to look through interest rate cycles, Zenith sees this outcome as an inherent part of the Fund’s makeup and a function of its strategy.

Overall, Zenith regards the Fund as an attractive offering for the conservative investor.

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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.” 

The Lonsec rating (assigned September 2012) presented in this document is published by Lonsec (who is Lonsec Limited ABN 56 061 751 102 AFSL No. 246842 and Lonsec Research Pty Ltd ABN 11 151 658 561, Corporate Authorised Representative of Lonsec Limited). The rating is a “class service” (as defined in the Financial Advisers Act 2008 (NZ)) or is limited to “General Advice” and based solely on consideration of the investment merits of the financial product(s). It is not a recommendation to purchase, sell or hold the relevant product(s), and you should seek independent financial advice before investing in this product(s). The rating is subject to change without notice and Lonsec assumes no obligation to update the relevant document(s) following publication. Lonsec receives a fee from the Fund Manager for researching the product(s) using comprehensive and objective criteria. For further information regarding Lonsec’s ratings methodology, please click here.

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“As the size of the nation’s savings and investment pool grows, the population ages, and the complexity of the regulatory environment, tax system and markets all increase, the need for advice and services, and the wealth to be advised on, are both growing,” he said. 

Mr Killen said that the results for the first quarter this year are comfortably ahead of last year’s – noting that in the same period last year, EQT had only two months of the aged care business it acquired and that some one-off expenses in the acquisition also impacted last year. 

“Having said this, markets continue to be volatile.  As a result, we find it difficult at this stage to be any more definitive about the first half result,” Mr Killeen. 

Managing director Robin Burns told shareholders that EQT had taken a number of significant steps in the long-term strategic development of the company. 

He said that the company had moved to being an integrated business with centralised support units supporting two revenue units, each solely focussed on the needs of one of the two client groups – private individuals and corporates. 

“The purpose behind these changes is to intensify our focus on growing in the wealth management sector, within the broader financial services industry. 

“We anticipate that the way the industry will change over the next few years will enhance the opportunity for companies like Equity Trustees, which have a history of high-quality personal services provided in the best interest of the client rather than of the company. 

“We expect to continue to see volatile market conditions for some time. Despite this, we have demonstrated over recent periods the ability to generate organic business growth in circumstances where many competitors or peers have struggled,” Mr Burns said. 

EQT’s corporate fiduciary and financial services business covers trustee and responsible entity services as well as fund distribution for co-branded and Equity Trustees’ investment products.  The private wealth services business includes superannuation services, personal estates and trusts, philanthropy, aged care services, and wealth management. 

Mr Burns said that while it will take several years for the changes the company has made to be fully felt, they spring from EQT’s history and values and also reflect our approach of focussing on the needs of clients so that the company can better deliver appropriate services. 

“These developments put EQT in a good position for growth,” he said. 

“The services we offer are going to be needed by an increasing number of Australians as they approach retirement and start to consider intergenerational wealth transfer. 

“Trustee companies are particularly well placed to pick up more business on these lines because of their extensive experience and expertise,” Mr Burns said.

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