The Australian Value Trust, Asian Value Trust, the Value Growth Trust, and the Global Ethical offerings (hedged and unhedged) were placed on hold in April 2012 after the departure of chief executive and portfolio manager David Buckland.

Mr Buckland’s departure was followed weeks later by that of portfolio manager, Chad Slater. These departures followed the resignation of deputy chief investment officer (CIO) and portfolio manager, Jack Lowenstein, in November 2011.

“We were disappointed to see the departure of such experienced and tenured portfolio managers but we took comfort from Hunter Hall’s hiring of portfolio managers Simon Bridger and Jonathan Rabinovitz, capable investors who each have over 25 years’ experience. The team of 13 now includes seven portfolio managers and two analysts,” said Mr Mills.

“While we are reassured by Hunter Hall’s overall level of investment experience and resourcing, we feel that the resumption of a stable team environment is very important for the firm following a tumultuous six months of staff turnover,” he said.

Risk manager and ethical analyst Michael Walsh is currently interim CEO of Hunter Hall, after Mr Buckland’s departure, but from July 30, will hand over his temporary executive duties to new CEO, David Deverall. Mr Deverall will focus on leadership and growth of the business.

24 July 2012

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After 11 years at Hunter Hall, Mr. Buckland is leaving the firm effective June 1 when Michael Walsh will take over as interim CEO until a permanent replacement is found.

Hunter Hall has also announced the appointment of two portfolio managers, Jonathan Rabinovitz (who is returning to the company) and Simon Bridger. They will commence on June 4 and July 1, respectively.

Mr Buckland’s resignation is the second senior departure from the team in six months, after portfolio manager and deputy chief investment officer (CIO) Jack Lowenstein’s resignation in November 2011. We believe that the latest departure represents further significant organisational disruption at Hunter Hall. 

S&P Fund Services analyst Tom Mills said: “We consider it prudent to place the funds ‘On Hold’ to enable us to fully assess the impact of these changes on Hunter Hall’s organisation and culture. We are currently in the process of conducting our Global Equities sector review and expect to publish our findings, including those on the Hunter Hall funds, in June”.

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Five of the trusts are now rated three stars, affirming the rating held prior to their ‘On Hold’ status. The Hunter Hall Asian Value Trust, however, is allocated a two-star ‘NEW’ rating. This change reflects the effects of the departure of former senior portfolio manager and deputy chief investment officer (CIO) Jack Lowenstein. 

Mr Lowenstein’s expertise was of higher importance to the Asian value strategy relative to the other Hunter Hall equity offerings. Mr Lowenstein was managing approximately 35% of the trust’s assets prior to his departure and held the greatest level of Asian equities experience within the team. We considered him to be a key driver of our conviction in the Asian strategy. 

“In affirming the rating on the other trusts, we recognise the continued presence of a portfolio management team including CIO Peter Hall, CEO David Buckland, and newly appointed deputy CIO James MacDonald,” said S&P Fund Services analyst Justine Gorman. 

Together Mr Hall, Mr Buckland, and Mr MacDonald manage the bulk of Hunter Hall’s FUM. However, further departures among these senior ranks may lead to S&P lowering its conviction on the Hunter Hall suite of trusts. 

Management of Mr Lowenstein’s share of the various trusts’ assets, as well as his stock research responsibilities, were reallocated to other members of the portfolio management team. We believe it will take team members time to develop familiarity with their additional stock coverage.

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Mr Lowenstein had been with Hunter Hall for 14 years, and has over 25 years’ investment experience. He was considered a key team member. He managed approximately one fifth of Hunter Hall’s firm-wide assets under management, and made an important contribution to its portfolios. 

“S&P will meet with Hunter Hall next week, and seek to understand how Mr Lowenstein’s investments will be managed, before reviewing the ‘On Hold’ ratings,” said Justine Gorman, analyst at S&P Fund Services.

The funds affected by this announcement are:

• Hunter Hall Australian Value Trust
• Hunter Hall Global Ethical Trust
• Hunter Hall Global Deep Green Trust
• Hunter Hall Global Ethical Trust Hedged
• Hunter Hall Asian Value Trust
• Hunter Hall Value Growth Trust

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“There are few surprises in store for investors familiar with Hunter Hall’s other equities products. The deep-value and benchmark-indifferent approach underlies their latest Asian Value Trust offering. While there is limited track record to assess the manager, early impressions are the portfolio is likely to produce returns that are markedly different from its blended benchmark. A fondness for smaller-cap stocks, large sectoral/country biases, and concentrated stock holdings is evident,” said S&P Fund Services analyst Justine Gorman. 

We consider that Peter Hall has assembled a promising investment team, with solid experience in senior ranks. A particularly strong alignment with investment objectives ensures a high performance culture.  

“While there is some experience in the research of Asian equities, the team is somewhat stretched as it is also managing different products with competing research agendas and a large investable universe. There is no analyst presence in Asia, which may prove a further challenge compared with well-rated peers who have dedicated and experienced teams based in the region—with language skills and ready access to company management,” said Ms Gorman. 

The fund’s investment process has clear stages with some discipline around an approach which has liberal constraints. The manager is distinguished not only by its style, but its focus on ethical, social, and governance (ESG) issues. Hunter Hall was a pioneer in this field, and its criteria are well considered and meaningful.

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 We are pleased to see stability return to the team at Hunter Hall after internally led changes resulted in the departures of four portfolio managers in late 2008 and early 2009. We see clear positive aspects in the current portfolio manager structure which pairs senior portfolio managers with more junior colleagues. “This more collegial approach to stock-picking encourages debate without compromising accountability and the manager’s performance-driven culture,” said S&P Fund Services analyst Justine Gorman.

The investment process continues to be refined with the introduction of additional portfolio risk constraints and improved portfolio-construction discipline. The manager’s value, bottom-up, benchmark-unaware style, gives the fund a relatively wide mandate, allowing large biases to specific securities, countries, sectors, or market capitalisations, which may deliver a different risk/return profile to the benchmark and peer funds.

This fund is currently meeting its objective and has a long, successful track record, even when measured against international small-cap benchmarks. “The fund’s ability to hold cash up to 30%, as well as to employ active currency management, gives it a level of flexibility that peers do not have,” said Ms. Gorman. Due to the active hedging policy, fund return volatility may be higher than a similar unhedged investment.

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