CareSuper has awarded two $100-million mandates to GMO and Wellington in an effort to shift its absolute return portfolio to a more defensive position.
The $7.7-billion fund has awarded just over $100 million to the GMO Multi-Strategy Trust and just under $100 million to the Wellington Global Total Return Fund in the past month, according to chief investment officer Greg Nolan.
“We’ve put them in the defensive part of the portfolio to give us a bit of protection and uncorrelated equity-market returns to try and just diversify the portfolio away from equity and, for that matter, fixed interest, markets,” he said.
The GMO Multi-Strategy Trust has a more diversified approach than the Wellington Global Total Return Fund, although both aim to outperform a cash benchmark.
He said the new funds would trade fixed interest without having duration positions in an effort to lower volatility.
“It is old-style fixed interest funds trading a bit of credit, a bit of yield curve, a bit of duration, a little bit of currency. Managers will tell you it is pretty boring. They do the stuff that just adds a little bit every day without any great dramas,” said Nolan.
The shift in strategy resulted in the termination of an approximately $60-million mandate with the Fauchier Partners Absolute Return Fund Trust , which invests in the Jubilee Absolute Return Fund. Late last year, CareSuper also terminated its investment with the Aurora Offshore Fund II.
“We were disappointed with the equity beta we got in both Jubilee and Aurora, and we thought that they didn’t provide the protection that we expected them to provide in the GFC and, I guess, subsequent to that as well.”
The final manager in the industry fund’s absolute return portfolio is the Schroder Real Return Fund, which was appointed last financial year.
Meanwhile, in late 2012 CareSuper also appointed Siguler Guff and Company to manage $75 million in a fund targeting the small buyout sector in the United States.
“We were looking to take advantage of some dislocation in the US market,” Nolan said. “All of these things are just opportunistic to try to take advantage of the banks that are downsizing that gap that seems to be opening up.”