Mercer revamps shares sector

Russell Clarke

Mercer Global Investments has announced plans for revamping its Australian shares approach by significantly reducing its manager line up from 10 down to five investment managers.

Mercer chief investment officer Russell Clarke said the changes are in sharp contrast to the way other multi-managers are operating in the space.

“Rather than increasing the number of investment managers in Australian shares portfolios and effectively diluting the allocations held by our most preferred managers, we have taken the opposite view and reduced the manager line-up. This means each of our most highly regarded managers will receive a higher allocation of total funds,” Clarke said.

According to Clarke, the new structure, which took effect over July and August 2007, offers a more focused approach by concentrating client exposure to only its most highly regarded return seeking managers or those managers with strong conviction in stock positions and above average performance targets.

In line with these changes, Mercer recently appointed BlackRock to manage approximately 25 per cent of total assets in Mercer’s Australian shares asset class.

BlackRock was granted a $1 billion tax aware quantitative equity portfolio, which is one of the largest mandates of this type yet awarded in Australian shares. The mandate replaced the previous core portfolio that was made up of six investment managers that occupied almost 90 per cent of total assets in Australian shares.

According to Clarke, a significant part of BlackRock’s appointment was the company’s integration of tax management into its process, which made it ideally suited to occupy the core holding in the asset class.

“Tax considerations are now explicitly incorporated into Mercer’s multi-manager mix. We believe that while this is a complicated area, the time has come to be more proactive and innovative on tax from a multi-manager perspective,” Clarke said.

“The investment industry has matured to such an extent that investors increasingly expect tax-effective solutions within mainstream asset classes like Australian shares.”