Zurich Financial Services has revamped its Australian equities line-up for its diversified funds and is close to signing up two global managers in exclusive arrangements for its sector funds.

Matthew Drennan, Zurich director of investments Australia, said he expected to finalise two exclusive retail distribution arrangements this year with a global small cap manager and a global REIT manager. “We look to source good managers on an exclusive basis,” he said. Drennan said the manager has approaches from international managers ‘every week’. Zurich tasked its asset consultant Mercer Investment Consulting with a ‘scoping study’ of its manager line-up for its diversified funds late in the third quarter last year which was further accelerated by Deutsche Asset Management’s (DeAM) decision to sell its fund management operations to Aberdeen in March. DeAM has been dropped from Zurich’s $850 million Australian equities portion of its diversified funds in favour of State Street Global Advisers (SSgA), Challenger Managed Investments and Schroder Investment Management. SSgA has been allocated 50 per cent of the $850 million to its index funds with the remainder split evenly between Challenger and Schroder. “The team that was managing it at DeAM was breaking up. It would have been a very hard decision to leave that with Aberdeen. It would be a completely different team,” Drennan said. Manager risk has also been reduced by splitting the funds between three managers but the general risk budget of the funds has been maintained, according to Drennan, who says the fund targets strong second quartile returns. Aberdeen has been appointed to manage over $2.1 billion in Australian fixed income and the cash management portion of the diversified funds.

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