NB has around $19 billion in assets under management across its Alternatives division (which includes Hedge Fund of Funds and Private Equity investments) and in Zenith’s view it is well set up to provide advisory services to Select particularly in the area of hedge fund selection.
 
Select’s long standing CIO, Dominic McCormick, is now ultimately responsible for portfolio management responsibility for SAP, although there is significant input from Sydney based consultant David Bell and London based Fred Ingham (of NB). Together the 3 individuals make the key portfolio decisions for SAP (with McCormick having the final decision).
 
The other key recent departure from the research team was Michael Winchester in early 2013. Winchester has over 12 years investment experience and had been the Head of Research at Select.
 
SAP potentially moving to daily liquidity 
In other developments Select has informed Zenith that it is considering moving the SAP from weekly redemptions at present to a daily liquidity profile. In our view this will result in some change for the underlying portfolio where some of the less liquid positions may need to be exited over the medium term.

In our view though, there should be limited performance impact (given a weekly redemption profile did not allow SAP to pick up a large illiquidity premium in any case).
 
Zenith’s View
The appointment of NB should cover the losses of Graham-Smith and Winchester as Select will ultimately have access to alternatives research undertaken by NB’s 19 member hedge fund team (including 3 operational due diligence specialists) as well as NB’s vastly resourced private equity research platform.

Further, we note that Select will have good access to senior personnel within NB with one of its 4-member investment committee members from the hedge fund business being assigned to advise Dominic McCormick directly (Fred Ingham). 
 
Further, Select has replaced Graham-Smith and Winchester with two sound replacements. Dr. Bartholomew Dowling was hired into Select as an Investment Strategist after previously holding a seat on Select’s external advisory committee.

Dowling was previously an Investment Manager (Listed Equities & Fixed Interest Portfolios) for AXA Australia. The second replacement is Thomas Good who has joined as an investment strategist after previously working as a Manager (Debt and Alternatives) for the Future Fund.

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