Findex has overhauled the way it implements tactical asset allocation (TAA) across its $8.5 billion managed account business, appointing J.P. Morgan Asset Management (JPMAM) to help deliver a new portfolio structure designed to reduce costs, improve implementation efficiency and enable faster portfolio changes during periods of market volatility.
The new framework incorporates a tactical asset allocation overlay that allows portfolio tilts and foreign exchange exposures to be implemented more efficiently, addressing many of the operational challenges associated with traditional managed account models.
Developed in conjunction with Specialised Private Capital, the structure is designed to overcome several limitations of TAA implementation within traditional managed discretionary account (MDA) models, including reducing the time required to transition between exposures, which previously involved trading across two physical managed funds.
According to the firms, the approach establishes a stronger portfolio core while enabling targeted trades to be executed in line with a total portfolio approach.
It also allows portfolio adjustments to be made more quickly, reducing time out of the market, while using derivatives to implement asset allocation and currency positions at a lower cost.
Specialised Private Capital CIO Kieran Canavan said the solution aims to set a new benchmark for managed accounts.
“As implementation manager and strategic advisor to the Findex Investment Committee, JPMAM supports Findex through portfolio changes, rebalancing and guidance on optimal implementation,” Canavan said.
JPMAM proposed a progressive framework that leveraged local structuring expertise and drew on its global investment management solutions teams across equities and fixed income.
The initiative involved the creation of two trusts – one equity and one fixed income – integrated within Findex’s MDA. Each fund is actively managed with defined alpha and tracking targets, while maintaining a low-fee structure.
“Having, 20 per cent of our total MDA Funds Under Advice (FUA) structured under this approach, we now have greater flexibility to adjust portfolios efficiently and
at scale. We have already successfully implemented TAA changes at a significantly reduced cost for clients which reinforces the value of this model.”
The framework also addresses challenges around foreign exchange hedging by providing access to FX management without the transaction costs associated with switching funds or unit classes.
In addition, it allows asset allocation recommendations to be implemented while minimising transaction costs and potential capital gains tax implications for clients.
“This initiative reflects our commitment to continually improve how we serve clients and deliver investment solutions which are responsive, cost-effective and aligned with their long-term goals.
“By addressing some of the inherent limitations of traditional managed structures, we are strengthening our ability to implement portfolio decisions efficiently, while maintaining the governance, accountability and transparency that sits at the heart of our investment
philosophy,” said Canavan.
The model is designed to reduce the need to sell down underlying managers each time a portfolio change is made, while giving Findex access to J.P. Morgan Asset Management’s global portfolio structuring and implementation expertise.
The appointment also highlights JPMAM’s growing focus on customised portfolio solutions, with the firms claiming the framework delivers greater implementation efficiency and lower costs for clients.
“Every client is different and we wanted to ensure we were able to provide Findex and Specialised Private Capital with a tailored solution that benefited them and their clients,” said Mark Carlile, head of wholesale at J.P. Morgan Asset Management Australia.
“Our flexible approach and deep engagement enabled us to deliver a solution that addresses their operational and investment challenges, setting them up with a foundation for
long-term success.”
