Fishing for the best returns

Warren Couillault and Carmel Fisher say they seek out small growing companies and wait for their value to be recognised. Picture / Fotopress

It would be a big mistake to take Fisher Funds' relative newcomer status as a sign the business still has a lot to learn.

In its 6 1/2-year history, the independent, privately-owned fund management company has amassed numerous awards and accolades, easily outstripping many larger, older funds.

Just yesterday, Fisher Funds Growth Fund was named fund of the year for the third time by researchers Fundsource.

The key to this ongoing success is simple enough, says founder and managing director Carmel Fisher.

"It's doing the same thing and doing it well. Anybody who spoke to Fisher Funds in 1998 would get the same message now."

Takapuna-based Fisher Funds is self-described (in its investor statement) as a careful investor. It "seeks out small growing companies then waits patiently for their value to be recognised".

With around $200 million under management, Fisher Funds has two unit trusts:

* The Fisher Funds NZ Growth Fund which invests in the shares of small, growing New Zealand companies.* The Fisher Funds Fledgling Fund, a fund designed especially for young and first-time investors.

"We are committed to investing in New Zealand - "our own backyard" - where we know the environment well, and can monitor our investments with ease, the company says.

"We believe that our backyard is laden with treasure, and like the kingfisher, we hope to continue to draw life out of unexpected sources."

Fighting words - but it does work for this company.

"The idea with Fisher Funds is whether you're a $2000 investor or a $50 million investor you should get broadly the same portfolio because our best picks on stocks are what go into our portfolio," Fisher said.

This style has seen Fisher Funds weather the economic cycles of the past few years and come out on top.

"A good investment style should allow you to perform well regardless of whether you've got bear markets or bull markets," Fisher said.

Fisher Funds was set up in August 1998 by Fisher and her husband, Hugh Fisher. Chief investment officer Warren Couillault bought into the business last year.

In late 1997 Fisher resigned from her job at Sovereign Assurance. She says she set up Fisher Funds Management to address the dearth of niche investment managers in the New Zealand market. The business began as a home-based one - a far cry from the flash Takapuna offices the company now inhabits.

Fisher Funds now has around 10,000 investors ranging from $2000 to $50 million in size. The average is around $10,000-$15,000.

The portfolio has about 15 companies - including Briscoes, Comvita, Freightways, Infratil, Kidicorp, Mainfreight, Mediaworks, Metlifecare, Michael Hill, New Zealand Exchange, Port of Tauranga, Pumpkin Patch, Ryman Healthcare, Turners Auctions and Waste Management.

Its basic investing rules are:

* No start-ups.

* No companies with a lot of debt.

* Investments must have a sustainable competitive advantage.

* They must be listed or companies expected to list shortly.

* There will be a preference for small and medium companies, with top 10 companies usually avoided, although if a company held enters the top 10, it doesn't have to be divested.* No more than 20 per cent of the portfolio is in any one company.

* Companies must have a record of consistent earnings growth and a forecast rate of profit growth that exceeds the market average.

"We buy businesses rather than buying shares," Fisher said. The company does exhaustive research before shelling out, meaning surprises are rare and the group of investments don't change often.

"We are true stock pickers. We don't base our decisions on the market or the indices," Fisher said.

"A traditional fund manager's portfolio will look exactly like the index and then they'll have a little bit more or less of some things. So, when the market goes down they go down as well - but they will try to go down less," Couillault said.

"What we do is: the company we like the most is the biggest company in the portfolio.

"It doesn't really matter how big the company is in the market."

Fisher Funds is open about the companies it holds but doesn't usually say how large the investments are.

The funds have a 20 per cent stake limit - in line with the takeovers code.

The company actively votes its shares and while it tends not to disclose which box is ticked, there is not a hard and fast rule.

"If there was a contentious issue and we somehow needed to make our position known we would, but our preferred approach is to go in and discuss any issues we have with the company first," Couillault said.

Similarly, Fisher Funds has not put anyone on the boards of the companies it holds, but again such a move is not out of the question.

"We've spoken to one company about the possibility of coming up with some names but we haven't appointed anyone so far," Fisher said. While the unit trust funds are well established, Fisher Funds is not resting on its laurels, having branched out in the past year.

In February the firm was appointed to manage 1.25 per cent of the New Zealand Superannuation Fund, investing in smaller New Zealand equities.

The following month the business launched investment company Kingfish, which listed after raising $58.5 million.

As the managers, Fisher Funds Management can reap 15 per cent of the returns above a benchmark based on the 90-day bank bill rate plus 7 per cent.

Kingfish shares were issued at $1 each and came with the option to buy another share at the same price in 2006, 2007 or 2008. The shares are trading around $1.20.

And further developments are afoot, but not yet advanced enough for Fisher and Couillault to share.

One thing they are sure about is that any growth has to be managed. Suggestions have been made that if Fisher Funds continues to grow it may run out of suitable investment targets.

Fisher has previously said she thinks $500 million would be about as much as she could handle to manage - but even then there was a rider ... "Don't hold me to that".

Resume

Carmel Fisher

Born: Wellington.
Age:42.
Education: Victoria University, Bachelor of Commerce and Administration.

Career:

* worked as a sharemarket investment adviser and analyst in the mid-1980s and through the 1987 crash.
* 1988 joined Prudential Assurance, stayed for six years.
* Joined Sovereign Assurance, left in 1997 to set up Fisher Funds.

Warren Couillault

Born: Auckland.
Age: 35.
Education: Waikato University, honours degree in Management Studies.

Career:

* financial analyst and country economist for Westpac.
* sharebroker for ANZ McCaughan Securities and Hendry Hay McIntosh (later Merrill Lynch).
* six years with sharebroker UBS Warburg in sales and analytical roles in Auckland, Sydney and London.
* joined Fisher Funds in 2002, bought into the company last year.