Investor Strategy News: Evolution of the new-look Contango

Source: Investor Strategy News
By Greg Bright

It’s been a journey, Marty Switzer says, in an understatement of his involvement in Associate Global Partners Ltd. There has been a transition not only in management and shareholder ownership but also in the fundamental business model of Associate Global Partners.

He became managing director in March 2018, after acting in that position for five months, following the resignation of George Boubouras. He had been a non-executive director, though, since the company listed in September October 2016 so he approached the journey with eyes wide open.

He now sees Contango more as a marketing and distribution platform rather than a manufacturer, allowing for a steadier revenue stream and a more controllable cost structure, befitting its listed status.

Contango had already co-owned Switzer Asset Management at the time of his executive appointment, alongside the Switzer family-owned Switzer Financial Group. Boubouras is a former investment banker and finance columnist. Peter Switzer, the family company’s patriarch and Marty’s father, was also a newspaper columnist. Boubouras became a frequent commentator on Peter Switzer’s regular Sky Business program and elsewhere even while he was the CIO of Equity Trustees.

Boubouras moved from there in 2014 and took up the chief executive role at Contango, forging the closer relationship with the Switzers and the invitation for Marty to join the Contango board.

“The Contango brand had been in the market for a long time,” Marty Switzer said recently. “We thought there was a lot of goodwill attached to it.” The former Contango Capital Partners launched as an equities boutique in 1998.

Boubouras had orchestrated, against the opposition of the previous management, the sale of Contango’s micro-cap listed investment company, where Contango had been a pioneer in the micro-cap sector. He sold the Contango Micro-Cap fund, which had about $155 million under management, to NAOS Asset Management, which was, and remains, a substantial shareholder in Contango.

When he was appointed interim chief executive back in November 2017, Marty Switzer dodged the question of his long-term personal plans but was happy to outline the new direction for the company. He told the Australian Financial Review that his priority was the restructure of the business, which involved targeting retail and SMSF audiences. “I’m very focused on that, I’m committed to the job at hand. We see a real opportunity to grow a specialist listed investment house working with a number of high-quality brands,” he was reported to have said. The restructure included moving Contango’s base from Melbourne to Sydney.

Switzer described the current Contango business as being Contango Mark III. Mark I was the founders, including inaugural chief executive David Stevens, and Mark II was George Boubouras’ leadership, still concentrating on manufacturing, and Mark III, under Marty Switzer, made the shift to wholesale and retail.

Helped by the sale of the micro-cap fund, Contango Mark III was also able to instigate a significant reduction in overall costs, aided by the move from Melbourne to Sydney. Headcount went from over 30 to 12, Switzer said. The firm also:

  • acquired the other half of the Switzer Asset Management joint venture
  • recruited an experienced new distribution team for both the Sydney and Melbourne offices, and
  • signed an exclusive wholesale/retail distribution arrangement with US global manager WCM Investment management for its ‘WCM Quality Global Growth’ strategy.

Contango now controls five listed investment vehicles, which are focused on income strategies in Australia and growth strategies globally. The two remaining Contango LICs are the Contango Income Generator Ltd (CIE) and the rebranded WCM Global Growth Ltd (WQG), a large-cap global growth fund managed by WCM Investment Management in California. Through its ownership of Switzer Asset Management, it also has the Switzer Dividend Growth Fund (SWTZ), which was Switzer group’s first listed vehicle – a managed ETF launched in 2017 – plus the WCM Quality Global Growth managed ETF(WCMQ) and the Switzer Higher Yield fund.

Led by its partnership with WCM, which retains separate institutional representation in Australia, Marty Switzer sees a lot of potential growth in the Australian-sourced retail global equities sector for Contango. He estimates the sector, led by Magellan, followed by Platinum, covers about $150 billion in Australian-sourced funding.

“We commenced our relationship with WCM in June 2017,” he said, “and we have raised more than $315 million, including the $230 million LIC. We just completed an options exercise for $96 million, with 56 per cent of shareholders exercising their rights,” he said.

“In August last year we launched a WCM exchange-traded managed fund with the same strategy as the LIC and we have just seeded an unlisted unit trust. Our objective is to make it easy for investors to buy the WCM Quality Global Growth strategy.”

Contango has increased its total funds under management by 56 per cent in the past 12 months and 150 per cent in the past two years, he says, with a tally of $511 million as of June this year.

Perhaps surprisingly, Switzer said the firm was seeing a lot of demand for the new unit trust. “A lot of the advice market wants the traditional method of investing for their clients,” he said. “We just want to make it easy for them.” Next off the block was likely to be a global small-cap strategy for WCM, initially as a wholesale fund.

He said that, in the medium term, the Contango strategy was to include other external managers in the line-up. He said: “But at the moment we’re concentrating on WCM. We want to make that a success first… We genuinely believe they are one of the best fund managers in the world. They are a top-quartile manager with an exceptional track record. We are very grateful they asked us to help them build their retail business in Australia.”

DISCLAIMER: Past performance is not a predictor of future returns. This update has been prepared for information purposes only. Any figures provided in this document are unaudited and approximate. This post does not contain investment recommendations nor provide investment advice.

You are strongly encouraged to obtain detailed professional advice and to read any relevant offer document in full before making any investment decision. This is not an offer to invest in any security or financial product.

© 2024 Associate Global Partners Limited.

Related content