MLC’s MasterKey, a $20 billion retail multimanager platform, has just turned 10 – and one-quarter of its managers have been with it the whole way. KRISTEN PAECH reports on the funds managers behind MasterKey and the evolution of the platform amid hefty competition and industry consolidation.
Almost a quarter of the managers on MLC’s MasterKey have been managing money for MLC since before the platform’s inception in 1999. Capital International has been part of MLC’s global equity portfolio strategy since 1985, when MLC’s multimanager funds were first launched, while UBS Global Asset Management has managed an Australian nominal bonds mandate for the same length of time. Currency specialist Bridgewater, boutique equities manager Concord Capital, Aussie equities manager Maple Brown Abbott, fixed income manager PIMCO and index house Vanguard Investments are among other managers that have managed money for MLC for up to 17 years. Michael Clancy, executive general manager of investment platforms at MLC & NAB Wealth, says while the MasterKey platform has evolved, many of the managers have been there since the start.
“Capital International has been part of our global equity portfolio strategy since 1985 when MLC first launched our multimanager funds,” he says. “Other firms like Maple Brown Abbott have been with us since the early 1990s in Australian equities, and PIMCO has been with us on the bond side for many years as well.” Maple Brown Abbott was appointed in 1992, while PIMCO has been managing global diversified debt securities and a real return strategy since 1997. High-yield debt manager W.R Huff has been on board since 2000, and MLC’s chief investment officer Chris Condon remembers that for most of that time, the New Jersey–based manager did not allow its analysts access to the internet. “If you wanted to get in touch you had to send them a fax…the firm wanted to do everything it could to stop its analysts ever seeing a broker’s report on a company. They were encouraged to form their own view on the debt,” he says.
The tumultuous year of 2008 saw MLC re-evaluate its global shares strategy, resulting in the termination of growth managers Alliance Growth Equities and Fortis Investments and value manager Bernstein Value Equities. As part of the overhaul, MLC appointed Mondrian Investment Partners and Tweedy, Browne Company on the value side, and Harding Loevner and Sands Capital Management on the growth side. UK-based manager Ruffer was also added to the platform this year, and has been managing a ‘global go-anywhere’ strategy since February. The Horizon Series of diversified funds formed the foundation for the manager of managers platform, which currently counts 34 funds managers in its stable. The series, Horizon 1 to 7, remain the core of the platform, which has evolved over time to include a range of externally managed funds. “The core of MasterKey is still the Horizon series of investment funds and that series of funds has evolved and developed, and the investment strategies used within those funds have become more sophisticated,” Clancy says.
“The choice has clearly broadened over time. We have listened to what advisers and clients are looking for in terms of reporting and improved our service. We have recently created straight through processing of [online] applications on MasterKey which is a huge improvement, especially for advisers launching applications.” The functionality, which was introduced last year, allows online applications to be submitted to MLC’s systems automatically, with no manual back-end processing required. “Many products and platforms con- tinue to be quite paper-based and being paper-based they are slower than electronic systems, so we have a strong desire to move as many of the ways in which our clients transact with us online to provide those clients and their advisers with as much flexibility as they want in terms of how they work with us,” Clancy says. Another significant development has been the launch in 2005 of the MLC MasterKey Fundamentals range, which mirrors the MasterKey investment platform but the funds have no embedded commission.
“MLC has been a long time advocate of a position that says investors should have a good understanding of what they’re paying in terms of fees and should agree to it and have the ability to turn it off if they’re not happy with the service that’s being provided to them,” Clancy says. “We launched a few years ago the Fundamentals series of funds which was at the time a landmark, especially for such a large institution in the Australian market, that provided that level of flexibility, choice, and transparency to build trust with the client.” Having shut down National Australia Asset Management in the early 2000s, National Australia Bank (the owner of MLC) got back into direct funds management in 2007 through NabInvest, a business which supports and invests in ‘boutique’ funds management firms. NabInvest owns Northwood Capital, which is both part of MLC’s Australian equity strategy and has a standalone Australian shares fund on MasterKey, and alternatives investment manager Antares, which has an Australian shares fund on MasterKey.
However Clancy says a Chinese wall in the form of independent manager research teams and a separate decisionmaking process split between different committees, allows MLC to maintain independence between NabInvest and MasterKey. “We also have a separate board – separate legal entities with executive and non-executive directors,” he says. “The quality and the standards of MLC’s multimanager funds is something we treat as very important. We have gone to great lengths to make sure the right decisions are made, both in reality and by perception, because it is so important.” Over the last 10 years the platform market has grown to a point where there are now multiple platforms of different types and numerous players competing for the investment dollar.
Aside from creating more choice for advisers and their clients, the proliferation of platforms has already led to a significant degree of consolidation, and this is expected to continue. The merger between Westpac and St George brought the BT Wrap and Asgard platforms together under one umbrella; the Australian Wealth Management and IOOF Holdings merger includes the Skandia platform business; and NAB acquired Aviva Australia’s wealth management business, including Navigator. Clancy says platforms are at an “interesting crossroads” in development, and the focus has evolved beyond “a fairly rudimentary” drive for choice, simplicity and efficiency. “Going forward the drive to innovate is huge,” he says. “In any marketplace as you get scale and experience costs inevitably come down and there’s a lot of competitive pressure to make platforms more efficient and a government requirement to continue to drive down costs within the super system.”