In nerve-wracking news for the likes of Fidelity, Marathon and Legg Mason, the NZ$13 billion Accident Compensation Corporation (ACC) has begun a trial to internally manage its global shares portfolio.
Nicholas Bagnall, ACC investment chief, said the move could see up to 10 per cent of the fund’s global equities managed from Wellington over the next couple of years.
Bagnall said with the ACC fund set to grow substantially over the next few years there was an opportunity to derive “superior risk-adjusted returns” at less cost by managing global shares in-house.
He said the ACC spent more on paying for global investment services than its entire in-house investment management services.
According to the 2010 ACC report, total investment costs amounted to just over $37 million or an expense ratio of just over 30 basis points.
Bagnall said if the trial proved successful the fund could shift a larger proportion of its global equities portfolio in-house after the initial period.
“We’ll talk to our existing [global equity] managers but there’ll be no immediate change to mandates,” he said.
The 2010 report reveals that the ACC fund, New Zealand’s second largest investment pool, had just over $2 billion – or 18 per cent of the total portfolio – in global equities (ex Australasia) across a range of strategies.
Bagnall said as well as investing directly in a number of UK listed investment trusts, the ACC fund had mandates with three global equity managers and invests into an underlying emerging markets trust.
It is understood the three mandates were with Fidelity, Marathon Asset Management and Independent Asset Management with a further investment into a Legg Mason emerging markets trust.
The ACC also has Australian small-cap mandates with Paradice Investment Management and Adam Smith Asset Management, however, Bagnall said the fund runs 70 per cent of its Australian equities portfolio in-house.
“We’ve got a good track record managing Australasian equities ourselves but there are other challenges with global equities,” he said.