MLC has defended its awarding of a $750 million mandate to Northward Capital, a fellow National Australia Bank-owned entity, against grumblings of favourable treatment from competitor Australian equity managers.
NAB’s boutique incubator, nabInvest, purchased the former IAG Asset Management domestic share team’s FUM and a 51 per cent per cent stake in the new boutique business late last year.
Last month, MLC allocated Northward 5 per cent of its $15 billion Australian share strategy. The general manager of MLC Investment Management, Michael Clancy, said he would be “foolish” to think that some fund managers negotiating with nabInvest did not “in the back of their minds think it might help them” score a mandate from MLC after an incubation deal was done.
“But there is certainly no indication that mandates will or won’t come…The decision-making processes [between MLC and nabInvest] are totally separate, and managers within nabInvest have to go through all the same hurdles as everyone else.”
In fact, Clancy said the appointment of a related-party manager required an extra level of approval, from the MLC Limited board, as well as the usual sign-off from the MLC Investment Management board. Clancy said MLC’s use of related-party managers was “nothing new”, pointing out that National Specialist Investment Management had overseen cash and fixed income for MLC for more than 20 years.
MLC has also used ‘in-house’ Australian equities managers before, including NAAM (then under Stephen Hiscock) and the former Lend Lease team which went boutique as Concord Capital in 2000, and were awarded an MLC mandate shortly thereafter. (Ironically, Concord was one of the biggest losers from the rebalancing which has taken place to accommodate Northward, its allocation falling from 8 per cent to 5 per cent.)
Clancy said that MLC had thought highly of the Northward team while it was still at IAG, but their ownership by an insurance company had been the “major factor” in the decision not to invest, because of staff retention concerns. He also pointed out that MLC had allocated no money to nabInvest’s other major acquisition so far, a significant minority stake in Pengana Holdings’ diversified family of boutiques.
The capacity-conscious Wallara Asset Management opened to an extra 3 per cent allocation in MLC’s recent rebalancing, taking its share to 10 per cent. Clancy said the new-look portfolio relied less on the performance of any single manager than previously.
Most of the former IAG team, under Darren Thompson, moved to Northward last November although portfolio manager Alan Martin opted to work with former boss David Dixon at Colonial First State Global Asset Management, in Marcus Fanning’s Australian equity growth team.