We've had a great response to our request for expressions of interest in an International Fund and have already begun developing the product. The Product Disclosure Statement (PDS) will be available from 1 February 2013.
Not surprisingly, investor interest also came with plenty of questions. We will have all of the finer details ready to share in January but, in the meantime, we would like to provide answers to the most common questions.
What will the International Fund invest in?
The Fund will have a very broad mandate; to invest in any listed security in the world. This means that if a company is listed, the fund will be able to own it. In practice, and particularly in the early years, the Fund will predominantly invest in developed countries with stable political environments including the US, Canada, United Kingdom, Western Europe, Hong Kong, Japan and South Korea.
Our aim will be to provide the best risk adjusted returns available from the world’s stockmarkets. There are no hard and fast rules but, once fully invested, we will likely hold 20-40 stocks in the portfolio and seek to minimise exposure to any one country or identifiable risk.
What will you do about currency?
Our expertise is in finding cheap stocks, not speculating on currency movements. Consequently, we won’t be trying to generate excess returns from currency trading.
To allow us to concentrate on finding the best value stocks, we will use hedging to adjust the underlying portfolio currency exposure to match the MSCI All Country World Investable Markets Index (“MSCI ACWI IMI”).
This means if we invest 30% of the portfolio in the UK because that's where we find the best value stocks, we don’t need to expose 30% of the portfolio to the Pound. Since the Pound represents only 10% of the MSCI ACWI IMI, we would hedge the portfolio’s exposure to the Pound from 30% down to 10%.
Please note we intend to hedge to the MSCI ACWI IMI, not back to Australian currency. Our returns, when measured in Australian currency, will therefore be a combination of the actively managed stock returns and the separate impact of the movement of the Australian dollar against a broad basket of global currencies.
Who will be making the investment decisions?
As Chief Investment Officer of Intelligent Investor Funds, I will have primary responsibility for managing the portfolio. We will be recruiting two new analysts who will be dedicated to the International Fund and are in the process of establishing an investment committee with experienced international investors. There will be more information on this front prior to the PDS being released in February and any experienced international investors interested in joining the team should email [email protected].
What is the proposed fee structure?
The fund will charge a base fee of 1.4% per annum and no performance fee. While we recognise that some investors prefer performance fees due to the alignment of interests they can create, we don't view a performance fee as suitable for this Fund due to the potential random impact currency movements could have on any one year’s returns.
We will be investing a significant amount of our own money in the fund, which provides a more symmetrical incentive than performance fees.
What will you do with your own money?
I will be changing my investment portfolio from 100% Intelligent Investor Value Fund to, roughly, a 50/50 split between the Value Fund and the International Fund. Other staff are under no compulsion to invest in our own funds but most do and those that work in our funds management business are not allowed to invest in direct equities on their personal account.
When can I invest?
You don’t need to do anything until the PDS is available. We expect to start receiving the first round of applications from 1 February 2013 and will be accepting weekly applications and redemptions every Friday thereafter.
If you'd like to register your interest here, we will send you a PDS when it is available.
Fundhost Limited AFSL: 233045 is the issuer of the Intelligent Investor International Fund (ASRN: 1610 843 778). The PDS for the fund will be available at www.iifunds.com.au and www.fundhost.com.au/investor or by phoning Fundhost at (02) 8223 5400 from 1 February 2013.
You should consider the Product Disclosure Statement in deciding whether to acquire, or continue to hold, the product.
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