Ipac Investment Services has terminated the mandates of four fund managers after it concluded a review of its $4 billion Pathways multi-manager Australian equity portfolios.
Ipac ended relationships with Integrity Investment Management, Maple-Brown Abbott, MIR Investment Management and Wallara Asset Management in August and September this year.
The terminated mandates varied between $100 million and $600 million in size, Ipac chief investment officer Jeff Rogers told InvestorDaily.
The review also resulted in the hiring of two new fund managers, Lazard Asset Management and GMO, which brings the total number of managers to four.
Last year, Ipac still had seven managers but a mandate with Challenger was ended in April this year.
"If you think about lessons learned from last year ... the push away from complexity will certainly be one of the trends over the next few years in financial markets," Rogers said.
Ipac also avoids holding many of the same stocks through different managers, Rogers said.
"I don't think we are saying six managers is wrong, but we think we can get the bulk of that value and actually deliver a very good package to our clients without having all these overlapping positions," he said.
"We are building a portfolio using very high quality managers for specific tasks to meet our overall portfolio need."
Lazard and GMO have been explicitly asked to concentrate on the small and mid-sized companies, because Rogers feels this is where active management can perform better than the market.
Although small and mid-sized companies require more research and, therefore, is a more expensive sector to manage than large companies, Ipac has balanced costs out by asking Lazard and GMO to hold the 15 largest companies close to index weighting and will not pay them for this.
"The average cost is actually lower, because we don't pay them for larger stocks," Rogers said.
The reshuffling of the portfolio does not mean there is more money allocated to small and mid-sized companies, but only that the larger stocks will be less actively managed and held closer to their index weighting.
"What you are finding, especially in the large cap names, is unnecessary turnover," Rogers said.
Schroders and Barclays Global Investors have been retained as managers and they will actively manage large company holdings.
