MTAA Super has reconfigured its Australian equities managers for the first time in two years, splitting a Macquarie Funds Management mandate in half and now equally weighting three enhanced equities managers in that asset class.
BlackRock Investment Management has been awarded an after-tax Australian equities mandate of $450 million, with the third, unchanged manager being Barclays Global Investors. Philip Brown, MTAA Super’s executive manager of investments said all three managers had tax-aware mandates and tax management was an area the $6 billion fund believed should be part of a manager’s mandate. “This is a place that managers can add incremental value, and those that can are ahead of those that can’t,” he said. Brown said the BlackRock fund was well positioned to do that.
BlackRock also has tax-aware quantitative Australian equities mandates with Mercer Global Investments, TASPLAN and Prime Super, and has another potential client interested in a similar, but 115/15 extended-style, after-tax mandate.
Chief investment officer of Australian equities at BlackRock, Ken Liow, said in a competitive environment funds were looking for every means to improve their results. While unwilling to put a figure on it, Liow said after-tax mandates could be the difference between a poor and good result.
The BlackRock fund is cognisant of the tax implications of all its investments, and has additional systems to run proposed transactions through, which include capital gains and franking credit implications. “We seek to enrich the client’s portfolio after tax is considered. This is an additional step most funds managers don’t do,” Liow said. “There are significant discounts on capital gains tax for stocks held more than 12 months, and we also assess the destruction of franking credits.”
While the MTAA Super mandate is significant, Liow said BlackRock could run an after-tax mandate of any size. He said it was intriguing funds were showing interest in these products now when the tax implications had been around for years.
MTAA splits its investments evenly between a market-listed portfolio and a target-return portfolio, with the Australian equities allocation sitting beside international equities, and small allocations to cash, fixed interest and a separate emerging markets equities exposure in the market-listed portfolio.
The strategic asset allocation of the fund remains unchanged.