Mercer boosts after-tax awareness with $1b BlackRock mandate

In a massive boost for the trend to after-tax awareness in funds management, Mercer Global Investments has awarded BlackRock with a $1 billion Australian equities mandate.

BlackRock’s quant team, led by Ken Liow, will manage the money within its tax-aware strategy, which takes account of a range of factors that are often client specific. These include participation in company share buybacks, timing of share sales to minimise capital gains and general portfolio turnover. After-tax reporting of performance has recently become an issue because managers which have paid more attention to after-tax returns may have been disadvantaged by the before fees and tax figures of the major asset consulting surveys. Warakirri Asset Management recently introduced its own after-tax benchmarks to improve reporting to clients. Maurice O’Shannassy, BlackRock managing director and joint chief investment officer, said that the firm developed individual benchmarks for clients with discrete mandates in its tax-aware service. “You typically won’t see our quant funds in the surveys,” he said. The Mercer mandate is for a style-neutral approach, although BlackRock can tilt towards any style. The big win follows other quant mandates awarded this year to BlackRock, including one from TasPlan and another from Prime Super. BlackRock recently closed its quant-managed Australian long/short fund because of capacity concerns. O’Shannassy said the manager was very mindful of capacity in its portfolios and this was being monitored on a mandate-by-mandate basis. While the firm has several billion dollars in quant strategies, capacity limits depended not so much on dollar amounts nor percentages of the market but rather on the individual mandate styles and strategies, he said.