Case study of the LGT Multi-Alternatives Australia Fund
LGT Capital Partners, an asset manager owned by the Princely House of Liechtenstein, has launched its first fund in the Australian market - the LGT Multi-Alternatives Australia Fund. The LGT Multi-Alternatives Australia Fund invests predominantly in private markets, such as private equity, real estate, infrastructure and private debt as well as liquid alternatives, including insurance-linked strategies, hedge funds and alternative risk premia. LGT Capital principal Nathan Pensabene answered some questions about the new fund for Industry Moves.
What goes into launching a new product in a new market?
As a firm we prefer to take our time to make these decisions based on long-term objectives. We gained our first client in Australia back in 2005 and opened the Australian office in 2014, so we have a lot of experience understanding the requirements for Australian investors and what they are looking for.
What is unique with this fund is that it is our first fund to be registered in Australia which will be available to a broader range of potential clients. It was important that we had a good understanding of whom this fund might appeal to and the differences in regulatory and operational requirements to make the fund suitable for Australian and New Zealand investors and investment platforms.
The process took nearly two years of development, working with various groups to make the launch a success. Pleasingly, the response so far has been very encouraging despite the fund only being open for investment for a couple of months.
Why did you decide to launch now?
Our firms DNA is in the management of the LGT Group Endowment, one of the largest endowment strategies in Europe, which has always had an approach similar to the well-known American university endowments, whereby we understand the important role that alternative investment strategies can play in a portfolio. We believe that private markets and liquid alternative investment strategies are just as important today given the challenging backdrop for traditional investments like public equities and government bonds. We had been monitoring the local market for a number of years in regards to interest in private markets investments and decided in 2019 that the timing was right to start the launch process. The pandemic in 2020 delayed the launch by a few quarters but throughout the process we have continued to see strong interest in our firm and the strategy given there are few options available with more than two decades of experience managing funds like this one.
How did you research market opportunities?
The decision to launch the fund was based on the success of managing these investment strategies globally for the past two decades and also based on existing clients asking us to provide an easier way to invest in a structure that would have a lower minimum investment and be able to sit on investment platforms. Our approach is always to seek strong partnerships with our clients so we were in active discussions early with potential partners who provided valuable insights and feedback. This allowed us to tailor the strategy to better suit what local clients are looking for which is an increased focus on private markets, particularly private equity and venture capital, where we continue to see very good investment opportunities.
What challenges did you face and how were they overcome?
One of the key challenges is clearly communicating what the benefits are of adding private markets to a portfolio, as well as the risks. As a firm we are looking for long-term partnerships with our clients and as part of this we have created a series of educational materials to help advisors and clients better understand what these are.
How did you decide on service providers?
We have a very rigorous process for selecting service providers globally and it was no different for this fund. Very early on it became clear which service providers locally could meet our requirements, had the same focus on forming long-term partnerships and delivering attractive outcomes for our clients.
Can you explain the fee structure?
As a firm we are focused on generating strong net investment returns for our clients that entrust us with their capital. We recognise that fees are a cost that reduces the net return, however you also need to pay these fees to access premier investment talent and strategies that can deliver strong outcomes. This means that we invest with both internal and external investment teams depending on the strategy. For the past decade we have utilised internal investment teams and co-investments to reduce the total cost of investment and will continue to do so where it makes sense. We have a strong reputation as being an early supporter of investment managers whereby we can negotiate preferential terms for the benefit of our clients.
Who is this product targeted at?
The fund is targeted at wealth managers, family offices, charities and similar investors that are looking to make a strategic allocation to an existing portfolio of alternative investment strategies across private equity, venture capital, private debt, real estate, infrastructure and liquid alternative strategies like insurance-linked securities and hedge funds. The fund has already been added to one investment platform and we will shortly have it available on others depending on client interest.