Mandate fees should be structured around a three-to-seven year ‘lock-up’, with cost-recovery only paid to the manager, but the performance fee component held back until the expiry of the lockup, according to FuturePlus CIO Michael Block. This performance fee would then be paid (or not paid) according to the long-term performance achieved against the agreed benchmark. Speaking at the 2010 Fiduciary Investors’ Symposium, Block acknowledged there are cases where the fixed-percentage fee model had been tweaked.
It pays to be extremely interested in fat tails
When the GFC’s tailwinds blasted through Outer Mongolia and Indonesia, The Cambridge Strategy’s extreme-risk approach had already alerted the boutique asset manager to exit Mongolia Energy and Bumi Resources. The manager claimed its method, which combines long-only global emerging markets equities with an active currency overlay, could generate additional alpha of up to 25 per cent, according to executive chairman Ed Baker. Baker said Cambridge’s position in Mongolia Energy in January this year was cut to one-third of its original size at the beginning of February – just before Mongolia Energy lost 10 per cent in the first week of February. In Indonesia, Cambridge’s stake in Bumi Resources was halved at the end of January – just ahead of Bumi losing 16 per cent.
QIC’s case for lifecycle evolution
Michael Drew and Evan Reedman, who were hired into Queensland Investment Corporation (QIC) early this year as lifecycle investing experts, have revealed their new approach to the strategy, which is based on protecting superannuants’ balances when the impact of market crashes is most lethal – in the 10-year periods on either side of retirement. Drew, a former Griffith University finance professor and QSuper investment committee member, said the approach would target members in this 20-year “conversion phase” of their investment glide path, when the “the amount of money at risk is at its zenith”.
CIOs search hard for soft dollars
The imminent release of the Cooper review’s final report catalysed fee debates within the industry last month, with one chief investment officer questioning whether soft-dollar arrangements between funds managers and brokers were back on the rise, while another said there was too much focus on fees paid to third parties by fiduciary agents. The general manager of investments at FuturePlus Financial Services, Michael Block, said that during a recent pitch by an Australian equities manager, the manager disclosed that it was buying premium external research, funded by soft-dollar arrangements with its brokers.
Tax doubts surround super insurance upgrades
Australia’s largest Catholic superannuation fund is lifting its total and permanent disablement (TPD) cover without increasing premiums, but confusion still surrounds the tax deductibility of those premiums. Australian Catholic Superannuation & Retirement Fund (ACSRF), in conjunction with its group insurer ING, has increased the value of each TPD unit between 8 and 28 per cent depending on the member’s age. The Australian Taxation Office (ATO) maintains that TPD premiums are not always fully tax deductible, particularly for policies with ‘own occupation’ definitions, and that this rule should have applied since July 1, 2004.
Macquarie tops the alternative pops
Australia’s Macquarie Group has maintained its position as the largest institutional alternatives manager in the world, according to the latest Towers Watson survey, as pension fund investors have adopted a steady-as-she-goes approach to asset allocation in the alternatives space.
Window of opportunity: corporate super takes its DTAs to Plum
Plum Financial Services has attributed some of its $4.7 billion of corporate super inflow over the past year to the government ‘window’ allowing the transfer of deferred tax assets, with a $500 million fund formerly administered by Mercer and invested with Russell the latest example.
FuturePlus to be sold, stripped of staff
One of the two owners of FuturePlus Financial Services, the $6 billion Local Government Super (LGS), has resolved to sell its stake in the services provider while also recruiting up to 40 of its staff members.
New-look MLC investment team takes shape
As MLC Investment Management reaches the shortlist stage in its search for a chief investment officer, it has hired the former asset allocation chief at UBS Global Asset Management to an investment strategist role.
Forget G7 government debt: Kapstream
Record-low government bond yields now fully reflect a slowdown in economic growth over the next year, and upside is limited according to boutique bond house, Kapstream Capital.
