Turbo-powered fund needs fuel

Photo: Grahame Cox

Mike Taylor is frustrated that poor-performing fund managers continue to attract so much money.

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He runs one of the best-performing funds in New Zealand, but try as he might, Mike Taylor from PIE Funds Management says he is struggling to get investors to trust him with their money.

Taylor's PIE fund invests in smaller companies listed on the Australian and New Zealand markets, and figures from Morningstar show it returned a staggering 109.24% in the 12 months to November.

Other, better-known fundies investing in the same markets, including Fisher Funds, Milford and Brook, gained between 35% and 78% over the same period as they rode a giant recovery in share prices from early March.

Those figures make Taylor's fund the best-performing retail fund in New Zealand over that period.

Taylor thinks he would also top the ranks over the two years to the end of December, when his fund passed its two-year anniversary showing an annualised return of 13.99%.

But the 30-year-old, who set up in business alone, has managed to attract just shy of $7 million to his fund, short of the $20m or so that would make him a decent living, he says.

"I can't understand why it is so hard to convince people to invest with me when people have poured hundreds of millions into the finance companies," said Taylor, who left commercial lender Bank of Scotland in 2008 to pursue his dream of being a fund manager.

He finds it particularly galling that many of the larger fund managers have continued to attract money despite relatively poor returns.

"There are managers out there that do quite well. Fisher's has obviously made money for people, Milford has made money, but some of the bigger ones are the problem. Financial planners tip money into them, but those are the guys that don't make money.

"The boutiques make money because everyone in them has a vested interest, but if your fund manager is with a big firm and their clients don't make money, they still get paid."

Taylor doesn't expect to manage more than a small portion of anyone's overall wealth because his fund is high-risk – he specialises in investing in small companies which can be very volatile.

He also likes to hold shares he can sell quickly, as he needed to do in 2008 when markets went haywire. That decision helped bump his PIE fund up the performance tables, as did some exceptional returns from firms like Australian gold miner Silver Lake Resources, telecoms business M2 Communications and software group CSG.

He was also a big investor in the multi-level marketing firm New Image, but has since virtually sold out after some huge returns.

The high-risk nature of the fund is also shown in one blowout when an investment in CommQuest (now D2 Marketing) proved a spectacular failure. The experience taught Taylor a thing or two about taking management at its word, he said.

- © Fairfax NZ News