Advance AM to cease direct retail distribution
Mercer has amended the eligibility of its Advance Asset Management funds following its acquisition from BT, with new wholesale investors required to have a minimum investment of $500,000.
The change will apply to some 11 Advance Investment Funds – Wholesale Units across its diversified funds and single-sector funds.
Currently, the funds have an initial minimum investment amount of $5,000 and are open to investment by direct retail investors who complete the application process.
However, from 1 July, new investors applying for units in the funds will be limited to wholesale clients as defined in the Corporations Act 2001 who are investing directly in the funds with an initial investment minimum of $500,000; and are accessing the funds through a platform or wrap service.
“The decision to change the eligibility criteria of the Advance products was a result of a recent review of the products, and was determined to be in the best interests of investors,” a Mercer spokesperson told Money Management.
The change applies to funds such as Advance Australian Shares Multi-Blend Fund – Wholesale Units, Advance Property Securities Multi-Blend Fund – Wholesale Units, Advance Cash Multi-Blend Fund – Wholesale Units and Advance Growth Multi-Blend Fund – Wholesale Units.
The only wholesale units fund unaffected by the change is Advance Defensive Yield Multi-Blend Fund as this will be closed to new investors.
All Advance Investment Funds- Retail Units funds will be closed to new investors.
Retail investors already invested in the funds will still be eligible to add more money and those invested via platforms will not be subject to the $500,000 minimum investment, the firm said.
Existing direct investors can continue to make additional investments into the funds in which units are already held, but will be unable apply for new investments in any other funds unless the wholesale eligibility criteria is satisfied.
Mercer added: “We are making this change to simplify the fund (wholesale units) application process and future distribution strategy. Changing the eligibility criteria does not impact our ability to grow the funds (wholesale units) in order to provide scale benefits to investors and we will continue to service all of our existing investors.”
Mercer has also made changes to its management fee structure which will reduce by 0.10 per cent per year from 1 October 2023 on the Advance Investment Funds- Retail Units funds. Its management fee on the wholesale unit funds will be unchanged.
Finally, there are further changes to indirect costs that will apply from 1 July 2023 –which will be 0.03 per cent per year for each fund. Mercer said this is a result of expenses incurred by the fund.
“Currently, expenses incurred by us in relation to each Fund are paid by us out of the management fee charged to each fund.
“From 1 July 2023, certain expenses that are incurred by us in relation to the proper performance of our duties in respect of each fund will be paid out of or reimbursed from each fund. That is, expenses will be charged in addition to the management fee of the fund. The indirect costs to be charged to the Funds are expected to be up to approximately 0.03 per cent per year for each fund.”
The Advance AM business was sold by BT to Mercer in April 2023, alongside the merger of BT’s personal and corporate superannuation funds with Mercer Super Trust.
A Mercer spokesperson told Money Management the change in eligibility criteria in these funds was unrelated to the sale.
Earlier this year, three Advance AM funds had received interim stop orders from ASIC for design and distribution obligation (DDO) failings.
ASIC determined that the Advance Balanced Multi-Blend Fund with $1.7 billion in assets under management (AUM), Advance International Shares Multi-Blend Fund with $1.4 billion in AUM; and Advance Property Securities Multi-Blend Fund with $1.1 billion in AUM had broadly drafted target market determinations and failed to define key concepts.
“On 30 March 2023, interim stop orders issued by ASIC on 14 March 2023 were revoked. Following the lifting of the stop orders on 30 March 2023, investors are able to fully transact on their accounts,” Mercer stated.
AUTHOR
Rhea Nath
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