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Active mandates shifting: BlackRock

  •  
By Tim Stewart
  •  
2 minute read

Australian investors are starting to adopt a less constrained approach to their actively-managed mandates, says BlackRock managing director Mark Oliver.

Speaking to InvestorDaily, Mr Oliver said clients are abandoning 'index plus two per cent' active strategies in favour of higher alpha strategies with a wider set of parameters.

"Some of the new active mandates are more likely to be absolute return or they may be seeking some illiquidity premium," he said.

"They're less constrained mandates. [We're] also starting to see more unconstrained or flexible fixed income mandates, giving managers broader opportunity to generate alpha," Mr Oliver said.

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Fund managers are also being granted greater scope to use a wider range of securities or sell stocks short, he said.

At the same time as increasing the active part of their portfolios, investors are also adding lower-cost index exposure, creating an 'hourglass' shaped portfolio, Mr Oliver said.

"The middle of the hourglass is a hollowing out of the mixed beta and alpha strategies," he said.

"So your typical 'index plus two per cent' strategies are what’s being stepped away from."

He also pointed to the danger of stacking active managers within an institutional portfolio, which can lead to an index-style return for active management fees.

This phenomenon is particularly apparent after a merger of two superannuation funds, Mr Oliver said.

"Often you can get a redundant effect where over-diversification of active managers could ultimately end in an ‘index minus’ type outcome," he said.

As a result, active management is often a "winner takes all" market.

"If you can find [active management skill] and you’re patient with it, [you should use it in] a more concentrated way, rather than stacking multiple managers on top of each other to achieve a sub-index outcome," Mr Oliver said.

Active mandates shifting: BlackRock

Australian investors are starting to adopt a less constrained approach to their actively-managed mandates, says BlackRock managing director Mark Oliver.

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