Zenith initiates coverage of Wheelhouse Global with ‘Recommended’ rating

Research house Zenith has awarded a ‘Recommended’ rating to the Wheelhouse Global Equity Income Fund managed by Australian-based specialist income manager Wheelhouse Partners.

The fund’s global equity strategy aims to deliver a 7-8% annual income return, plus some capital growth, while assuming 40-50% less risk than the equity benchmark.

”Zenith believes Wheelhouse has thoughtfully designed the derivative overlay to generate a growing and consistent income stream. Furthermore, Wheelhouse has efficiently managed the costs of its protection and has demonstrated an ability to deliver upon its capital preservation objectives,” the Zenith report says.

“Wheelhouse’s investment approach is differentiated and appealing for investors who are income focused. In addition, we draw confidence from the investment outcomes produced by the Fund in periods of market distress, which were consistent with expectations.

“Overall, Zenith believes the Wheelhouse team has a wealth of experience relating to the options market and risk management, which ensures that the Fund’s risk management processes are strong.”

Alastair MacLeod, Managing Director of Wheelhouse Partners commented, “We are very pleased that Zenith’s first rating of the global fund acknowledges the quality of the investment strategy, as well as the scarcity of genuine income generative investments in the current market environment.

“The fund’s focus on capital preservation has also been recognised, an element we believe is paramount with markets touching new highs amidst widespread economic uncertainty. These defensive characteristics were amply demonstrated when the coronavirus pandemic spread globally, with the Fund posting a positive year-to date performance through to March 31, 2020,” MacLeod said.

Over the past three years to 31 July 2020, the Wheelhouse Global Equity Income Fund has delivered a total income return of 7.4%, plus unit price growth of 2.0%, for a total annualised return of 9.4% per annum. From a risk perspective, the fund beta has been 0.59 during this period, reflecting the meaningfully lower risk investment approach. A beta of 1.0 means equivalent risk to the benchmark.

The fund’s investment approach is based upon integrating a systematic, rules based derivative overlay with a portfolio of quality focused, global listed securities. In addition, actively managed downside protection strategies, known as ‘tail hedging’, are designed to protect capital in a drawdown and limit losses.

Wheelhouse Partners was launched in April 2017 and has recently completed a successful transition to an independent fund manager with specialisation in income generation and capital protection.

The Zenith rating follows on from the ‘Investment grade’ rating issued by Lonsec in 2019.


Wheelhouse Partners is an established Australian investment manager that targets income generation and capital preservation by applying systematic derivative overlays to a global equity portfolio. Its flagship fund, the Wheelhouse Global Equity Income Fund, has generated 7.01% for the 12 months to June 2020, demonstrating the team’s ability to deliver a genuine defensive equity return with high income generation. Wheelhouse commenced investment operations in 2017.

The Zenith Investment Partners (ABN 27 103 132 672, AFS Licence 226872) (“Zenith”) rating (assigned 20 August 2020) referred to in this piece is limited to “General Advice” (s766B Corporations Act 2001) for Wholesale clients only. This advice has been prepared without taking into account the objectives, financial situation or needs of any individual and is subject to change at any time without prior notice. It is not a specific recommendation to purchase, sell or hold the relevant product(s). Investors should seek independent financial advice before making an investment decision and should consider the appropriateness of this advice in light of their own objectives, financial situation and needs. Investors should obtain a copy of, and consider the PDS or offer document before making any decision and refer to the full Zenith Product Assessment available on the Zenith website. Past performance is not an indication of future performance. Zenith usually charges the product issuer, fund manager or related party to conduct Product Assessments. Full details regarding Zenith’s methodology, ratings definitions and regulatory compliance are available on our Product Assessments and at http://www.zenithpartners.com.au/RegulatoryGuidelines

Further information
Queries regarding Wheelhouse Partners can be directed to:
Emma Cullen-Ward at OneProfile Communications
0414 989 137 or [email protected]

Why gold is the ‘canary in the coal mine’ for this fund manager

On 17 August, Wheelhouse Partners featured in the Australian Financial Review as a Monday Fundie story by reporter Luke Housego.

Read full article here

A capital injection from hedge fund legend Alan Howard has made Wheelhouse Partners assert itself as an income fund to watch.

The growing divide between asset prices and their intrinsic value is a problem confounding not just mere mortals but also professional managers of exceptional pedigree.

Asked if there is systemic risk in the unconventional monetary policy experiment that is a hallmark of the COVID-19 era, Alastair MacLeod doesn’t mince words.

Alastair, left, and Andrew MacLeod set up the fund with Sam Jacob in 2017.  Attila Csaszar

“Absolutely,” the Wheelhouse Partners investor says. “There’s no penalty for expanding balance sheets and adding more liquidity to the market.

“But there’s always longer-term unintended consequences. And I think, obviously, the price of gold is kind of starting to really be the canary in the coalmine.”

The “wedge” that’s being driven between fundamentals and asset prices, whether that’s shares or otherwise, is at the heart of the rally in gold prices that has pushed the precious metal to record highs.

“Given the global expansion in central bank balance sheets during COVID is expected to approach $US6 trillion this year, more than three times what we saw during the GFC in 2009 when unconventional monetary policy got under way, I don’t think it’s unreasonable that markets are beginning to get jittery about inflation becoming a thing again.

“That’s what I believe the gold price is telling us.”

The 46-year-old, along with his brother Andrew MacLeod, make up the investment team of Wheelhouse Partners, an income funds manager that launched with an index-tracking global equities strategy in 2017.

And with the backing of hedge fund legend and Brevan Howard co-founder, Alan Howard, Wheelhouse broke away from Bennelong Funds Management at the end of last month.

Man and machine

The manager’s ties with Howard build on the firm’s macro pedigree and cautious views of the expanding role of central banks in financial markets.

Andrew spent 14 years in London and Geneva as a multi-asset derivatives trader for Brevan Howard. And while he is now a long way from the massive directional bets that are a feature of the trading desks of the global hedge funds, Andrew says there’s a lot of transferable knowledge that he has taken from the experience.

“[Although] we don’t trade multiple assets for the fund, the same screening process is used in determining how to structure a hedge for the portfolio to achieve the optimal outcome,” he says.

Wheelhouse’s third founder and chief information officer is Sam Jacob, who also spent time at Brevan Howard. The Sydney-based software developer and mathematician headed up quantitative development and technology for Brevan Howard in Israel.

“[Jacob] helped build a lot of the risk management platform that the traders use at Brevan,” Andrew explains. “So he’s built a similar style risk management platform for us.”

Alastair adds: “The calibre of the build is very institutional in terms of the architecture and the data management and analytics that are in the platform.”

Systematic approach

 The technology platform the former Bloomberg developer built from the ground up underlines the fund’s strategy execution and is key to its growth plans. “The beauty of using a very systematic approach and using a platform like that is that it makes our business scalable,” Alastair says.

“It means … with a three-man investment team, you can actually re-purpose for different asset exposures to really deliver our value.

“And that means that we can run and manage very effectively a global equities strategy. But also we can use that same [intellectual property] and approach and platform [to] run an Australian strategy, which is what we’re intending to do later this year.”

As part of those plans and the new capital injection, Wheelhouse last week announced the appointment of former Paradice Investment Management chief operating officer Tony Hammond as its inaugural COO, and Hamel Strategic Partners’ Andrew Aitken as its distribution lead.

Wheelhouse’s embrace of technology is coupled with a critical stance on the more labour-intensive models of active funds management.

“Most resourcing [in] funds management is being spent on stock research and that idiosyncratic [task of] trying to generate alpha. And I would argue that the ROI on that is incredibly low across the market,” Alastair says.

“I think you’ve got to design a business and a funds management business to reflect that environment.”

Low-cost tilt

 The shift towards lower-cost offerings was highlighted again last week when one of Australia’s largest asset managers, Magellan, unveiled its plan to push further into the retail investor market. Magellan announced the launch of an exchange-quoted low-cost MFG Core Series, aimed at the growing demand for inexpensive investment products.

Alastair says Wheelhouse differentiates itself by side-stepping active stock-picking altogether and instead adds value through its use of hedging to protect capital from market falls and its “buy-write” strategy to generate predictable income from option premiums.

“We’re focusing on an element that we can really add value in, which is systematic overlays and tail protection, where you can make a big difference in terms of wealth outcomes, and what the investor receives.”

The strategy helped Wheelhouse’s global equity fund deliver a return of 7 per cent over the year to June, which compared with 5.2 per cent for its benchmark, the MSCI World Index (ex-Australia), at a cost of 89 basis points.

The return is heavily weighted towards income. From inception to the end of May, income has accounted for three-quarters of the fund’s 9.2 per cent per annum total return.

And with the uncertain outlook for dividends and negligible yields on cash and fixed-interest, the fund also touts this as key to the offering.

“If dividends are going to be lower in dollar terms [and] if interest rates are lower for an extended period, the value of generating income from a different source becomes increasingly valuable,” Alastair says.

He describes the fund’s use of writing options over holdings as selling the hope for upside to convert that into a more certain income return.

“You still have the benefits of share ownership—where you own the share and you receive dividends—but you’re really wanting more certainty and more reliability in your return profile.”

The siblings moved back to Brisbane to start the fund, choosing the city where they both grew up over the traditional financial hubs of Sydney or Melbourne, where Alastair last worked as a portfolio manager for what is now Talaria Asset Management.

“I think family brought us back. [We] both had kids and I think when you grow up in Queensland, you miss it eventually you really want to come back to it,” Alastair says.

“And it’s great seeing the kids playing with each other as they grow up and realise all the benefits of living in south-east Queensland.”

Luke Housego is a journalist for The Australian Financial Review based in the Brisbane office.

Wheelhouse completes independent structure, announces new partners

Australian-based specialist income manager Wheelhouse Partners (Wheelhouse) today completed its transition to its new independent structure following recently agreed terms for its executives to acquire Bennelong Funds Management’s stake in its business. 

The revised structure includes a new co-investor in Wheelhouse, Alan Howard. Mr Howard is a co-founder of Brevan Howard Asset Management LLP, the UK hedge fund where Wheelhouse trader Andrew MacLeod and chief information officer Sam Jacob worked for many years across several markets. Mr Howard replaces Bennelong in the capital structure of the business. 

Managing Director of Wheelhouse, Alastair MacLeod, said Mr Howard’s investment represents a tremendous vote of confidence for the business which began operating under Bennelong’s structure over three years ago. 

“While volatile market conditions have played to our strengths, we remain steadfastly committed to the core objectives on which Wheelhouse is founded; to generate a reliable, consistent income stream whilst preserving investor capital from market downturns,” MacLeod said. 

“For the first time in decades, investors are facing falling dividends, fewer traditional income yielding options and inflated asset prices across the board, which is transferring more risk to capital bases. 

“Our global strategy seeks to address these concerns, targeting a high-income yield whilst safeguarding our investors’ capital. 

“The time is right for a differentiated investment approach and we are excited to be in a position to invest in our business and create solutions for investors to help navigate this challenging environment.” 

The MacLeod brothers are based at Wheelhouse’s headquarters in Brisbane, while Sam is based in Sydney. 

The team will be supported by recently appointed Chief Operating Officer Tony Hammond, well known in Australia’s funds management industry for his stewardship of fast-growing boutique investment managers. 

Hamel Strategic Partners will head up distribution efforts for Wheelhouse, led by Andrew Aitken, the former Head of Distribution at Bennelong, and Cameron Dickman, formerly Head of Distribution at AMG and Australian Unity. 

The Trust Company (RE Services) Limited (Perpetual) is now the Responsible Entity for the Wheelhouse Global Equity Income Fund. 

The team has completed extensive testing of an Australian equities focused fund, applying the same rules-based and disciplined derivatives strategy to that of its flagship global fund, however over an index of Australian listed securities. The local fund is expected to be rolled out to Australian retail and wholesale investors later this year. 

 

Notes

Wheelhouse Partners is an established Australian investment manager that targets income generation and capital preservation by applying systematic derivative overlays to a global equity portfolio. Its flagship fund, the Wheelhouse Global Equity Income Fund, has generated 7.01% for the 12 months to June, demonstrating the team’s ability to deliver a genuine defensive equity return with high income generation. Wheelhouse commenced investment operations in 2017.

 

Further information

Queries regarding Wheelhouse Partners can be directed to:
Emma Cullen-Ward at OneProfile Communications, 0414 989 137 or [email protected]

The debate (or fight) over tail risk hedging

Alastair MacLeod of Wheelhouse Partners appeared on ausbiz to comment on a very public spat between two financial market heavyweights – and who’s right in the debate about the merits of tail risk hedging.

Wheelhouse pursues independent growth

Bennelong Funds Management (Bennelong) and Wheelhouse Investment Partners (Wheelhouse) have agreed for Wheelhouse executives to acquire Bennelong’s stake in the Australian boutique manager after a successful three-year partnership.

Under its independent ownership structure, Wheelhouse will continue to focus on delivering purpose-built investment solutions that target income and protection for Australian retail and wholesale investors, including its flagship Global Equity Income Fund.

The fund’s net positive returns year-to-date are attributed to its rules-based systematic approach to preserving capital, particularly in market crises, while continuing to generate consistent income.

Alastair MacLeod, Managing Director of Wheelhouse, said, “We are excited to take full ownership of our business and extremely grateful to Bennelong for its support in establishing and positioning Wheelhouse for future success.

“We remain fully committed to delivering defensive income for Australian investors challenged by today’s ‘lower for longer’ equity growth environment and historically low interest rates. We look forward to leveraging our track record and momentum to pursue new opportunities.”

Bennelong CEO, Craig Bingham, said “We are proud to have partnered with Wheelhouse, and look forward to seeing them continue to flourish.

“Over the past three years, Wheelhouse has focused on its objectives of generating income, protecting capital and lowering volatility – timely offers for today’s market. We wish them well as they enter their next phase of growth and development.”

“Across the industry, this is a time of change and undeniable challenges, but we’re also seeing the arrival of new opportunities,” said Craig. “At Bennelong, we continue to refine and strengthen our global capabilities, managing the business to deliver the best possible outcomes for our clients.”

Wheelhouse has agreed terms with new distribution partners and has appointed a new responsible entity for its offerings, which will be announced later this month. The team also plans to launch an Australian equities focused fund, which will apply the same rules-based and disciplined derivatives strategy used for the global fund.

The buyout and transition arrangements will be finalised by 31 July 2020.

Volatility – precursor to bear market, or correction?

Watch this interview with Alastair MacLeod of Wheelhouse Partners, appearing on YourMoney, to hear his views on:

  • Whether current volatility is a portent to a bear market, or the correction we’ve been wanting;
  • The effect of a protracted period of low interest rates;
  • Performance of growth versus value stocks; and
  • Why we feel short-term losses so acutely – even though we logically know investing is most effective over the long term.

Lack of market liquidity leading to increased volatility

Alastair MacLeod, Managing Director of Wheelhouse Investment Partners, joins the Sky News Business team to discuss the reasons behind increasing market volatility, including the impact of the US corporate buyback black-out period and the long-term interest rate cycle.

Watch here

What would a market fall mean for retirees?

Alastair MacLeod, Managing Director of Wheelhouse Investment Partners, appears on ABC News to discuss the potential signs of a market fall and what this could mean for retirees.