BlackRock’s “High Conviction Australian Equities Fund” has officially been transitioned to Pendal Group, which assumed the role as investment advisor to the fund on 29 March.
The fund has reportedly been revised, with Pendal updating a number of parameters, including the investment objective and benchmark index.
Specifically, the fund’s investible universe has been broadened, now encompassing all industrial and resource stocks in the S&P/ASX 300 index.
The new investment objective is: “To provide a return (before fees, costs, and taxes) that significantly exceeds the S&P/ASX 300 TR Index (Benchmark) over the medium to long term.”
The fund had previously sought to deliver a specific return of 4–6 per cent higher than the S&P/ASX 300 Industrials Ex Top 5 Market Cap Total Return Index (Benchmark) over rolling three-year periods.
The concentration of stocks held in the fund has also increased from between 20 to 40 stocks to between 15–20.
The equities-to-cash ratio has also been revised, with Australian shares now making up a minimum of 70 per cent of the fund, down from 90 per cent.
Meanwhile, the management fee has been reduced by 5 bps to 0.65 per cent per annum; the performance fee — 15 per cent on net performance above benchmark — has been waived; and the buy-sell spread has been reduced from 0.275 per cent to 0.25 per cent.
However, BlackRock stressed the fund would continue to “follow a high-conviction strategy with a concentrated portfolio”.
“Pendal’s investment process for Australian shares is based on its core investment style and aims to add value through active stock selection and fundamental company research,” BlackRock stated in a continuous disclosure notice published on 28 March.
“Pendal’s core investment style is to select stocks based on its assessment of their long-term worth and ability to outperform the market, without being restricted by a growth or value bias.
“Pendal’s fundamental company research focuses on valuation, franchise, management quality, and risk factors (both financial and non-financial risk).”
Given the transition is now complete, the temporary fee holiday has ended, with investors charged the 0.65 per cent management fee from 29 March.
The transition of BlackRock’s high conviction fund to Pendal Group forms part of the asset manager’s new Australian equities strategy.
In January, BlackRock confirmed plans to “reposition” its fundamental equities business in Australia following an internal review.
The new strategy — which purportedly aims to align the firm’s offering with evolving customer expectations — involved an overhaul of the BlackRock High Conviction Australian Equity Fund.
This included the closure of the BlackRock High Conviction Australian Long Short Fund and the BlackRock High Conviction Australian Future Companies Fund.
To facilitate the transition, BlackRock entered into a binding memorandum of understanding (MOU) with ASX-listed Pendal Group.
Pendal Group was tasked with working alongside BlackRock’s global manager research function within multi-asset strategies and solutions (MASS) to align the BlackRock High Conviction Australian Equity Fund with its “Focus” strategy.
“Existing clients in the fund will benefit from a broader Australian equities exposure, with a similar high-conviction approach, managed by a well-resourced team of 19 investors that have a longstanding performance track record and received the highest ratings available from Morningstar, Zenith, and Lonsec,” a BlackRock spokesperson told InvestorDaily in January.
In remodelling its Australian equities business, BlackRock committed to maintaining a “core concentrated portfolio”, which is benchmarked to the ASX 300 index — tipped to provide clients with “greater diversifying exposures”.
“The evolved product offering will also take into account scale and volatility considerations that are in the best interest of unitholders,” the spokesperson added.
The repositioning of BlackRock’s Australian equities business came amid reports of a global company overhaul.
The changes were reportedly in response to significant US market volatility over the course of 2022.
BlackRock’s global business recently released its financial results for the quarter ending 31 March, reporting a 10 per cent decline in operating revenue.
The dip was attributed to “significantly lower markets”, dollar appreciation on average assets under management (AUM), and lower performance fees.
Total AUM fell 5 per cent to US$9 trillion (AU$13.4 trillion).