BT Funds NZ has lined up a new selection of alternative asset managers following the closure of an incumbent fund offered by fellow Westpac subsidiary, Advance Asset Management.
The alternative refreshment has seen Goldman Sachs, BlackRock and K2 Advisors pick up mandates with BTNZ to run strategies for the Westpac NZ investment arm.
Matthew Goldsack, BTNZ head of investment strategy, said the manager changes apply to all Westpac diversified funds, including the bank’s $4 billion KiwiSaver scheme, as well as to products offered via the bank’s advisory network.
The trio of alt managers replace BTNZ’s previous allocation to the asset class via the Advance Alternative Strategies Multi-Blend Fund. Advance, the Westpac multi-manager subsidiary acquired following the bank’s 2008 purchase of fellow Australian bank St George, shuttered the alternatives fund this June.
Since inception in June 2011 the Advance alternative product – a fund of hedge funds managed by US-headquartered manager Ramius – returned 1.66 per cent in Australian dollar terms versus 3.1 per cent for its benchmark (the Bloomberg AusBond Bank Bill Index).
As at June 30 this year the Advance product reported funds under management of almost A$1.2 billion with all capital set to be returned to investors in a wind-up process.
According to the Westpac KiwiSaver 2016 accounts, Advance “has advised there is no concern regarding the quality of the [alternatives fund] underlying assets and that they expect to pay up to 90 per cent of its value by 31 October 2016, and the remainder by April 2017”.
Advance managed just over $150 million in alternatives on behalf of the Westpac KiwiSaver scheme.
Meanwhile, Goldsack said BTNZ had made “initial investments in alternative risk premia strategies” offered by Goldman Sachs Asset Management and BlackRock. The Westpac funds management group had also engaged Franklin Templeton subsidiary, K2 Advisors, to “manage a customised portfolio of liquid hedge funds, built to BTNZ’s specific investment requirements”.
He said BTNZ’s alternative strategy “is designed to provide exposure to non-traditional return sources such as alternative risk premia and hedge funds in a liquid and cost effective manner”.
“With market risks and valuations across most asset classes at elevated levels, there is a real need to manage diversified pools of assets beyond the traditional asset classes,” Goldsack said. “This means broadening the tool box and allocating to asset categories that are likely to provide diversification benefits for clients, particularly in periods of market stress.”
Despite the closure of the Advance fund, BTNZ retains an exposure to Ramius through an investment in a BT Australia product. According to the most recent product statement, BTNZ invests in almost 20 underlying managers including: AQR Capital Management (multi-asset), Ardevora Asset Management (global and UK equities), Kapstream Capital (fixed income), Lansdowne Partners (alternatives), River and Mercantile Asset Management (UK and global), Standish Mellon Asset Management (fixed income), T Rowe Price (global equities) and Wellington Management.
BTNZ is also “monitoring developments” in the KiwiSaver market following a media outcry over potential exposure to cluster bombs in index fund holdings, Goldsack said.
The Westpac KiwiSaver default fund gains international shares exposure via a Vanguard index product. Vanguard confirmed last month it was working with NZ KiwiSaver providers to develop a product that excluded certain stocks highlighted during the cluster debate.
Goldsack said the Westpac KiwiSaver scheme was “yet to finalise our decision” on replacing the Vanguard exposure, which amounted to $4.4 million as at the end of March this year.