A Sydney small caps boutique has signed an exclusive retail distribution agreement with Zurich Investments and has also won the mandate to manage Zurich's $60 million small companies fund.
Zurich Investments will now be the sole distributor of the Frank Villante and Paul Biddle's small caps boutique Celeste Funds Management's fund has outperformed the benchmark S&P/ASX Small Ords Accumulation Index by 6.1% net of fees since inception more than 21 years ago.
The boutique has hitherto done its retail distribution in-house but will now rely on Zurich to look after its retail distribution in Australia including relationships with platforms, research houses and advisers.
Celeste managed $592 million at end of last financial year but is currently down to $75 million after losing a large super fund.
"What we are doing is keeping the existing unlisted trust structure for now but we are clearly interested in other vehicles such as SMAs [separately managed accounts] and exchange traded funds in the future, not just for Celeste but all our strategies," Zurich's head of savings and investments Matthew Drennan told Financial Standard.
The two will have a fee-sharing arrangement with Zurich preferring not to take minority stakes in the managers it distributes to widen its opportunity set to investment firms that may be reluctant to part with equity.
Celeste was chosen after an internal search of all Aussie small caps managers with good performance, low downside, capacity and stable teams.
Drennan has worked with Celeste's chief investment officer Frank Villante in the course of his previous work at Shadforth Financial and IOOF.
Celeste is also replacing Sigma Funds Management on the $60 million Zurich Investments Small Companies Fund which started its search for a new manager in June after Sigma informed of its plans to shut down.
"The number one thing is signing an exclusive retail distribution agreement, but if a manager is good, we don't have a problem in appointing them to manage [for] our diversified funds," Drennan said.
The Zurich small caps fund has a capacity of $200 to $300 million.
Colonial First State, which had money with the Sigma-managed strategy in separate mandates, terminated the funds last month.
In October last year, Celeste bought back a stake in the business previously owned by Pacific Current Group, taking the firm's equity to a 90% ownership by the investment team.