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'Little' Kiwi investment proves stellar

By Graeme Kennedy

Friday 21st March 2003

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US funds manager Robert Scharar admits the little New Zealand investment vehicle he started more than a decade ago still would not rate on his industry's radar ­ but its performance has been stellar, far outranking other Asia-Pacific funds with returns above 20% in the quarter to February 20

Mr Scharar, president of Houston-based FCA Corporation, which has more than $US1 billion under management, began the Capstone New Zealand Fund after visiting cousins in Auckland during the early 1990s and identifying investment opportunities here.

Renamed the Commonwealth Australia-New Zealand Fund two years ago but with almost 65% of investments still in New Zealand shares and bonds, it was the best performer of all FCA Corporation's funds and a strong moneymaker for Americans who had invested about $US20 million in the specialist portfolio, he said.

He decided to include Australia to gain flexibility in transtasman activities as many New Zealand banks were Australian-based.

Mr Scharar has since launched Global and Japan funds under FCA's subsidiary unit Commonwealth International, which began with the New Zealand venture.

"I thoroughly enjoyed your country and saw a lot of things were happening," he said. "I was attracted by the restructuring of the economy from a highly regulated and protected environment to free trade.

"The country was a good producer with a highly trained and educated workforce ­ and there was no other US fund following New Zealand then.

"US investors did not overwhelm us with funds at a time when the dotcom market was starting to take off and people lost interest in companies that made real things but interest has recovered in the past few years after the dotcom collapse."

Mr Scharar said his strategy had been to focus on "unresearched" stocks ­ those with strong balance sheets, profitability and dividend payouts to offer true value but which were often overlooked by investors and brokers.

"They had no international following and only limited local interest and although they were good companies no one was bothering to look at them," he said. "I would find them by talking to New Zealand brokers, my relatives in New Zealand ­ and subscribing in Houston to The National Business Review."

Mr Scharar said the Australia-New Zealand fund portfolio included ports, forestry, meat, agriculture infrastructure and transport companies, with about 30% of the investment in government and commercial bonds and bank notes. He said New Zealand stocks delivered higher dividend rates and payouts than in many other markets.

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