RenTech decodes Westpac value

Board instability and costly governance challenges triggered by compliance failures have inspired many institutional shareholders to liquidate their investments in Westpac this year.

However, several New York investors have been building positions in the bank, most notably Renaissance Technologies (RenTech), the secretive US hedge fund founded by Cold War code-breaker, James Simons.

Even as the bank’s scrip slumped to a 12-year low in the final week of March, RenTech was adding to its holding of Westpac’s New York listed depositary receipts.

Westpac’s US-listed depositary receipts are an equivalent claim to equity in the bank as each of its ASX-listed shares.

According to filings lodged with the US Securities and Exchange Commission, Westpac and BHP are the only Australian investments included in RenTech’s US$11 billion Medallion fund.

Portfolio changes in the Medallion fund are monitored carefully by other US institutions because of its unequalled performance since the fund was established in 1988.

Since inception the fund has generated average annual returns in excess of 30 per cent.
According to RenTech’s latest disclosure to US regulators in May, the Medallion Fund increased its interest in the Westpac by 350,000 depositary receipts in March to 2.75 million.

At the close of trading on Friday RenTech’s holding in Westpac stood at US$37 million. On March 31 the investment was worth US$28.2 million.

Other lesser known hedge funds have also taken long positions in the bank this year, including the Hong Kong based Athos Capital, which acquired almost 250,000 depositary receipts in the March quarter.

Athos is a former strategic associate of Westpac, having partnered with the bank’s former subsidiary Ascalon Capital Partners in 2012 to launch several Asian-focused investment funds.