Top trio spot funds opening

High-profile asset manager Stephen Montgomery has left the Accident Compensation Corp to form a funds management company.

Aspiring Asset Management, in which Montgomery will team up with former prominent stockbrokers Murray Doyle and John Rattray, will concentrate on high net-worth individuals rather than seek wholesale funds mandates or try to attract retail investors.

Montgomery's record at the ACC was an enviable one. ACC investment manager Nicholas Bagnall said the funds he managed achieved an annual 17.4 per cent return over the 13 years ended in June, compared with a 10.1 per cent return from the benchmark.

Bagnall said he had known for two or three years that Montgomery was planning to go out on his own and that had allowed for orderly succession planning at the ACC, which has $6 billion under management.

Montgomery had managed all ACC's New Zealand equities until three or four years ago when he moved to concentrate on smaller companies, which make up about 30 per cent of the portfolio.

He will be replaced by analyst Blair Tallott, formerly at JP Morgan and Ord Minnett, who was hired about two years ago.

Montgomery, 52, said the time had come for a change. "The older you get, the more difficult it gets to muster the energy."

Doyle, former principal at Doyle Paterson Brown, which was sold to BT Securities and then Deutsche Securities, said the trio would take advantage of planned changes to rules governing managed funds.

"Traditionally, for anyone with a reasonable amount of money, it would have been quite silly for them to invest in managed products.

"They're unlikely to be taxed doing it themselves, but funds, as they stand, are taxed."

The Government plans to align the tax treatment of investment in New Zealand companies through managed funds with the way direct investment in the same shares is taxed.

Funds now pay tax on capital gains but individuals, unless they are professional share traders, do not.

If the tax rules change, it will become more efficient and cost effective for wealthier individuals to invest in managed vehicles.

To begin with, the trio will pool their not inconsiderable portfolios.

Doyle said they planned to contract out all the back-office paperwork.

"The people at the front end can concentrate on what they know. A separation of custody and settlements is quite good from a prudential and fiduciary basis, particularly if you're handling other people's money."

It might take up to six months to get the firm established, he said.

"We're in no particular rush. We all enjoy each other's company and three heads are better than one. We can have some fun together and make some money. It can't get much better than that."

Rattray was a director of JP Morgan after its takeover of Ord Minnett Securities. Montgomery is a director of Pyne Gould Corp, Doyle is a director of Michael Hill, Hirequip and Kirkaldie & Stains and Rattray advises the Salvation Army on its investments and manages money for some private individuals.