Bye, bye BlackRock as fund slashes bond exposure

A major industry fund has terminated a fixed interest mandate with BlackRock Financial Management, following a strategic decision to almost halve its exposure to the asset class.

HostPlus chief executive and investment officer, David Elia, said withdrawing $95 million from the international fixed interest manager was “purely related to a rebalancing process” as opposed to a specific problem with the manager itself. Elia said the fund has been slow and cautious to rebalance, moving “for some time” from a high of 14 per cent in fixed interest to a target of 8 per cent, which it has almost reached. The freed capital has been mainly used to fund new commitments across its incumbent unlisted property and unlisted infrastructure managers. No particular manager has received the bulk of the former BlackRock mandate. Elia said the increased exposure to unlisted property would, more specifically, be put towards “opportunistic property” – or property with a development focus. The new re-weighting away from fixed interest and towards unlisted infrastructure was not dissimilar to what some funds had already done. “In essence, we’re using infrastructure as a proxy for fixed interest,” Elia said. HostPlus has also removed BlackRock from its member investment choice menu as part of terminating the mandate. Elia said members are able to move to either of the remaining fixed interest managers, Macquarie Investment Management for Australian fixed interest or US-based Bridgewater Associates for “diversified” fixed interest. Members who do not reallocate by April 1 will be moved into the default balanced option, he said.