MLC Investment Management (MLC IM) has overhauled its $12 billion Australian equities strategy and terminated two managers.
The firm terminated its mandate with Lazard Asset Management and Contango Asset Management, with each holding between $750 million and $1 billion in assets.
MLC IM Australian equities portfolio manager Peter Sumner said the decision was not just based on the performance of the managers, but included a wide range of criteria, including how the underlying holdings fitted in with the broader portfolio.
"The remaining managers are better able to meet the requirements of the portfolio, but they [Lazard and Contango] both have added value to the portfolio over time," Sumner said.
The two mandates have been re-weighted across the remaining eight managers: Balanced Equity Management, Concord Capital, Dimensional, JCP Investment Partners, Maple-Brown Abbott Investment Managers, Northcape, Wallara Asset Management and Northward Capital.
Sumner said there were no immediate plans to hire new managers.
MLC also said it had split the $12 billion in assets into two pools: $2 billion in its sector fund, the MLC Australian Share Fund, and $10 billion in its diversified funds, the Horizon range of funds.
Sumner said the assets were split because the two types of strategies had different requirements.
"When a client is buying a diversified portfolio, they are buying global equity, domestic equity, some private equity, fixed income securities - so a multi-asset class diversified portfolio. Someone is buying a total package of risks," he said.
"You have to look at how each of those asset classes is interacting with each other, so it is a complete strategy, whereas the Australian shares fund is a single-sector Aussie equities strategy. It sits there and is judged against all other single and multi-manager Aussie-only [funds].
"Rather than saying 'one size fits all', you want to maintain what the core Australian equities piece is going to produce in the sector fund and then manipulate the Aussie equity exposure within the diversified fund because it is mixing with other assets. We are looking at the different risk/return aspects of all those asset classes."
As a result, the sector fund now has different weightings across the managers than the Horizon funds, and Sumner also has the ability to have different manager line-ups in the two strategies.
Sumner said there were no plans to separate any other asset classes in the diversified funds into separate pools.
In 2001, MLC IM already split its fixed income assets.
