BT keen on AQR for up to $4b in global equities

BT Financial Group is expected to appoint a small but highly regarded US quant manager, AQR Capital, as its main global fund manager, giving the firm an effective entry to the Australian retail market with a mandate of up to $4 billion.

The arrangement, which has been under discussion since late last year, follows AQR’s search for a way to enter the Australian market following winning support by Russell Investment Group and positive signs from other asset consultants of its prospects. However, a BT spokesperson said yesterday that there had been no decision taken to either appoint a new global manager or to take money away from Putnam Investments. BT has had an ‘alliance’ with Putnam of the US for most of its global equities funds for several years, inherited through Westpac’s purchase of Rothschild prior to its purchase of the former BT Funds Management. Rothschild, as a much smaller manager than BT, felt that an alliance with a global manager in each asset class was better than adopting a standard multi-manager approach because it provided exclusivity and more commitment from both parties. Following its deal with Putnam, Rothschild made a similar arrangement in global bonds with BlackRock, which continues as BT’s international bond manager. As announced last month, BlackRock is to acquire the global funds management business of Merrill Lynch, which will have implications for an ongoing arrangement with BT in Australia. AQR, based in Greenwich, Connecticut, has a range of long/short funds, some of which are closed, as well as a traditional long-only global equities fund. The manager uses a mix of value and momentum styles, with a heavy reliance on quantitative research. It is understood that AQR also had discussions with Macquarie Funds Management to provide a retail distribution platform in Australia, but was convinced that BT was a better option after a visit by BT’s managing director, Rob Coombe, to the Greenwich office late last year. AQR also considered setting up its own office in Australia or hiring a third-party marketer to represent the firm. Both of these options are now unlikely because of the BT arrangement. The BT spokesperson said the firm continually monitored and assessed external managers to make sure BT was delivering the best capabilities to investors. “Putnam continues as our alliance partner,” she said.