Growth in the volume of fixed income funds managed by BlackRock in Australia has seen the firm’s Singapore-based head of Asia-Pacific portfolio management, Michael Prljaca, join the manager’s fixed income team based in Sydney.
Prljaca will report directly to BlackRock’s head of indexed and enhanced portfolio management, Craig Vardy.
BlackRock currently manages about $11 billion in indexed and enhanced funds, up from about $3 billion when the group merged with Barclays Global Investors (BGI) in late 2009.
BlackRock’s head of fixed income, Steve Miller, says there has also been “more complexity in terms of the mandates we’ve been awarded”.
“We’ve also launched some fixed income exchange-traded funds, through the iShares brand,” Miller says.
“It was clear to us that we needed to augment the resources in that team.
Miller says Prljacka was responsible for the compliance of BlackRock fixed income funds managed in Singapore, Japan and Australia, “so it’s not like he’s unfamiliar with fixed income…and some of the considerations that you need to manage [fixed income] securities”.
Meanwhile, BlackRock continues to build out its active, model-based approach to managing fixed income funds, which uses eight principal strategies and 30 sub-strategies to identify opportunities in fixed interest markets.
Miller says the aim of the approach is to provide an effective and flexible framework for portfolio managers, which enables them to systematically exploit opportunities.
“You can never obviate the need for portfolio manager judgement,” Miller says.
“But the strength of this approach is that…it takes the emotion out of investing.”
BlackRock uses the model-based approach to managing fixed interest securities in two funds locally – and Australian bond fund and a global bond fund – and while many fixed interest managers have struggled recently to match benchmark returns, Miller claims both BlackRock funds have exceeded their respective benchmarks and continue to meet long-term performance objectives.
Multi-strategy approaches to fixed income investing are gaining favour among investors. Earlier this month, Advance Asset Management’s $550-million Australian Fixed Interest Multi-Blend Fund awarded new mandates to AMP Capital Investors and Aberdeen Asset Management, both of which use multi-strategy approaches to managing fixed interest portfolios.
The Advance fund’s portfolio manager, Ron Mehmet, told I&T News at the time that the traditional approach to managing domestic fixed-interest portfolios has been overtaken by international events. Mehmet said Australia’s bond market is being influenced as much by international events as by domestic fiscal and monetary policy, and “as a result, you have to take in the whole world”.