What is it?
Third Link is a professionally managed fund-of-fund and all fees received by Third Link Investment Managers from managing the fund’s investments, net of expenses incurred, go to support the non-profit sector.
It’s an interesting little product. It’s an innovative type of thing; it’s very hard for anyone else to do. Apart from having the expertise, you needed to be pretty well-known.
How is it going?
It kicked off in the first half of 2008 and also another milestone is that it’s just passed giving $2 million away now [in total] to charity and that obviously increases every day as the fund size increases. Funds under management are $60 million.
Who are the main investors?
It seems to be, if I was to guess, primarily SMSFs, and also there are some private ancillary funds. It’s suitable for anybody.
How do you select fund managers?
If you actually looked at how I select funds and combine them, I would probably completely fail all the normal boxes that an institutional manager mixing managers would tick.
I think the engineers behind most fund-of-funds way over-engineer and end up engineering managers right back to an index. It’s not surprising that, to my knowledge, every fund-of-fund has underperformed the index.
The managers I’m after are the ones who are demonstrably trying to create outperformance…not benchmark huggers. I’m happy to judge them over five-year periods. I don’t care what they do over the one, two years.
I can seriously invest for the long term and I don’t care what it does in the short term. I couldn’t care less how it does against others. All I care about is on an individual manager basis, I can look at their performance and [they’ve outperformed].
There are not a lot of managers who I use really. I don’t think there are many managers out there in Australia swinging the bat [for active management].
What’s the structure?
I invest in an existing fund of each of these managers.
What happens at the end of each quarter or half year is I just get a cheque back from the various managers rebating fees.
Originally I created it as a diversified growth fund, but around 18 months ago I changed the thing so it was just 100% Aussie equities, and I did that because I found over time that some wealth advisers were saying they would use a sector specific fund. But it was very successful when it was a diversified growth fund.
Chris has more than 25 years’ experience in building successful wealth management practices, most notably at Colonial First State which he joined in 1988. He was instrumental in taking the company from a start-up operation to become Australia’s largest investment manager during his fourteen-year tenure.
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