Brook moves to close down fund

A lack of liquidity in New Zealand shares has led one fund manager to close a fund to new investors.

Brook Asset Management Ltd is restricting applications for its Brook Alpha to existing investors only.

The fund has about $100 million invested in 17 Australian and New Zealand stocks, with just under half in New Zealand stocks.

The fund is concentrated, in that it invests in a relatively small number of stocks, and the manager likes to exit individual stocks completely when its view changes.

Brook managing director Mark Brighouse said liquidity, or the ability to get in and out of New Zealand stocks, was becoming an issue.

"We're not there yet but we don't want to be in a situation where liquidity is a constraint on our performance," he said.

"The only way we can deal with it is by keeping an eye on the size of our fund," he said.

He said there was a chicken and egg situation in that people did not invest in some markets because they lacked liquidity, but there was not enough liquidity because people were not investing.

"The key measure of capital markets development is not the number of listings, the ease with which securities can be issued or the market capitalisation - it is the ability to get in and out of an investment.

"Not only has the size of the Australian market grown so much faster than New Zealand but the turnover and the liquidity in the market has been higher," he said.

The Alpha Fund is managed by Brook portfolio manager Slade Robertson, who took over from Paul Glass.

Glass positioned the Alpha fund for the downturn in equities markets by increasing its cash holdings to around 50 per cent.

The fund increased its equity holdings from around February this year after Glass left. The cash weighting is now about 10 per cent.

The Alpha Fund's gross return for the six months to the end of May was 12.2 per cent compared to a New Zealand sharemarket that was up 2 per cent.

Brook also manages the Tasman Fund, which invests in a larger number of companies. Simon Botherway and Glass left Brook Asset Management on December 19.

Australia's Macquarie moved to full ownership of the firm last year.

- NZPA