MLC has overhauled its $8 billion global share strategy, terminating two growth managers and one value manager, all for reasons of organisational risk, and appointing four new managers in a move that more evenly distributes clients’ capital.


Following a comprehensive review of the strategy, MLC terminated mandates with Bernstein Value Equities, Alliance Growth Equities and Fortis Investments and appointed Mondrian Investment Partners and Tweedy, Browne Company for value mandates, and Harding Loevner and Sands Capital Management for growth mandates.

Paul Duncan, portfolio manager, global shares at MLC Investment Management, said clients’ capital was more evenly distributed across the managers in the new strategy.

“In the previous strategy, while the largest allocation to any one manager was Capital [International] at 18 per cent, a harsher test is: what was the largest allocation to one institution or organisation, and Alliance Capital and Alliance Bernstein is the same firm,” he said.

“So we used to have a 15 per cent allocation to Alliance Capital and a 17 per cent allocation to Alliance Bernstein; we had almost one third of the strategy dependent on one organisation, whereas in the new strategy, the largest dependency is Capital at 18 per cent. So there’s less reliance on any one organisation as well as any one investment.”

In the value space, Duncan said the investment processes of the three new managers were well diversified.

Dimensional buys lots of stocks which are cheap based on price to book, while Mondrian holds less names, and is more concerned with whether or not a company can sustainably grow real dividends. Tweedy, on the other hand, focuses on ‘margin of safety’, where the firm will only buy a stock if they think it’s at least 40 per cent cheap based on the firm’s own valuation of what it’s worth.

“When we look at Mondrian, Tweedy and DFA we thought they complemented each other far more than a blend of just DFA and Bernstein,” he said.

“There are times when it can be somewhat grey in terms of whether one [strategy] is materially superior strategy than the other. We’re not going to do anything until we think it’s worth the transaction costs and the taxes and expenses of moving around a lot of money to make the change. But when we’ve identified four managers we think we can bring on, you have to find a way of funding that and unfortunately there is normally a casualty in that process.”

Duncan admitted uncertainty over the ownership of Fortis played a part in the decision to terminate the manager.

“The Fortis team in Boston still exists, they are still managing money, but that’s certainly an observation – there’s some organisational uncertainty there that doesn’t exist with any of the managers that we appointed,” he said.

MLC’s global equity funds under management managed using the multi-manager approach is $8 billion, but another $1.6 billion is sourced from the MLC Platinum Global Equity Fund. 

 Managers  Old  New  Change
       
 Bernstein 17% -17%
 Dimensional 10% 12%  +2%
 Mondrian  – 12%  +12%
 Tweedy, Browne  – 12%  +12%
 Capital International 18%  18%  –
 Wellington Management 12%  10%  -2%
 Harding Loevner  11%  +11%
 Sands Capital  11%  +11%
 Walter Scott  16%  14%  -2%
 Alliance  15%  –  -15%
 Fortis Investments  12%  –  -12%
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