Case study - Switzer Higher Yield Fund
Switzer Asset Management, a wholly owned subsidiary of Contango Asset Management, has re-launched its Switzer Higher Yield Fund on Chi-X Australia. Marty Switzer, CEO of Contango Asset Management, explains why they decided to list on Chi-X and how they went about choosing service providers.
What goes into launching a new product?
We re-launched the Switzer Higher Yield Fund as a quoted managed fund with investment manager, Coolabah Capital Investments. The structure allows units to be bought and sold on the stock exchange, as well as directly through the responsible entity. The first step in in this process was appointing a best of breed manager to manage the portfolio. Coolabah Capital Investments fit this description. Given the quoted managed fund is a new structure, significant time and effort was spent ensuring the operational, legal and compliance framework was in place to support the vehicle. We worked intimately with our manager partner, Coolabah Capital on this process, and worked very closely with the Exchange, Chi-X Australia, and regulator to obtain the necessary approvals. The team then developed a strategy to promote the fund to the retail market with a particular focus on the direct and IFA market.
Why did you decide to launch on Chi-X?
We’ve had a strong relationship with Chi-X over a number of years and had been in discussions for some time about launching a product together. The Switzer Higher Yield Fund provided the perfect opportunity to partner with Chi-X. Given the complexities of the new structure, the Chi-X team have proven to be an excellent partner to work with.
What was behind the decision to team up with Coolabah Capital Investments?
One of Contango’s key strategic priorities is to partner with and promote best of breed managers to an audience of self-directed investors and independent financial advisers. We wanted to partner with a high-quality fixed income manager and view Coolabah Capital as a leader in this space. Coolabah has some of the most experienced fixed-income specialists in the country. The portfolio is led by Christopher Joye, chief investment officer and portfolio manager, and Ying Yi Ann Cheng, portfolio management director and market technicals analyst. Christopher Joye and the Coolabah brand are well known in the direct market with many investors being familiar with Chris as one of Australia’s leading economists, policy advisors and fund managers.
What challenges did you face and how were they overcome?
Our largest challenge was the structure of the product. The Switzer Higher Yield Fund was the first fixed-income product in Australia to launch as a quoted managed fund, and just the third product to use this structure, initially pioneered by the quotation of the Airlie Australian Share Fund (Managed Fund) on the ASX in June 2020. Another challenge was the time of the product launch, with units quoted on the exchange on the 23rd of December.
Can you explain the fee structure?
The management fee is 0.70 per cent. The performance fee is 20 per cent of the excess performance over the benchmark. The benchmark is the RBA Overnight Cash Rate plus 1.50 per cent. There are no establishment, contribution, withdrawal or exit fees.