Trustees Executors (TE) will see its supervisory powers extend across the entire Mercer NZ suite of funds now closing in on $10 billion.
In a note to clients, Mercer says TE will assume independent trustee duties for the group’s wholesale funds come July 1, replacing the current in-house model.
TE is already the licensed supervisor for the Mercer range of regulated funds – covering the KiwiSaver, FlexiSaver and employer super master trust – as well schemes managed on behalf of the NZ Defence Force.
Under the new arrangement TE will perform the same service for Mercer wholesale funds, which are not legally required to appoint an independent trustee.
Martin Lewington, Mercer NZ head, said the firm’s “wholesale product offering and funds under management in New Zealand has significantly grown”.
“Consistent with our belief and desire to apply global best practice governance, we are extending TE’s mandate as an independent trustee of our retail schemes, to cover wholesale,” Lewington said.
Mercer previously used an internal trustee for the wholesale pools that “served the Trusts well”, the client note says.
“… however, the size and scope of Mercer’s wholesale product offering in New Zealand has continued to expand in recent years, as have the associated trustee duties (… clients’ assets now total over $9bn, invested across more than 40 Mercer Portfolios),” the note says. “As such, the Board of Mercer NZ feels it is appropriate to move to a best practice, independent trustee arrangement. TEL’s appointment will commence on 1 July 2021.”
But the change will come with a new fee schedule levied over the full fund range including the wholesale products held via the Mercer Investment Trusts New Zealand (MITNZ) entity.
“Mercer Investments New Zealand Limited did not charge a fee as the Trustee of MITNZ. One of the consequences of appointing an independent Trustee is that from 1 July 2021, a trustee fee will apply. This will be paid out of MITNZ,” the note says. “The extent of our relationship with TEL has enabled us to negotiate a very competitive fee for their services as the Independent Trustee of MITNZ, which will be up to 0.01% of the total value of MITNZ’s assets.”
Mercer says wholesale fund documents will be updated by July 1 this year to reflect the governance changes.
Last week the global Mercer business reported total assets under management tipped above US$380 billion at the end of March this year.
In a statement, Mercer says 2020 saw a “notable shift” in its client base with growing interest outside the firm’s traditional strength in the defined benefit employer pension market.
Mercer says about half of all new asset flows now emanate from “a diverse set of non-defined benefit pension asset owners including insurers and endowments among others”.
“From Jan 2016 to Apr 2021, defined contribution and other types of non-pension assets increased 245%, as other kinds of asset owners began to seek out sophisticated, responsive and cost-efficient investment strategies,” the statement says.
The group signed on over 100 new clients globally in 2020 alone.
Rich Nuzum, Mercer president investments and retirement, says in the release: “There is a strategic change in our industry underway, driven by reviews of how existing governance arrangements performed during the pandemic. Similar to the period immediately following the 2008-2009 financial crisis, more investors believe they need to strengthen their investment governance and implementation capabilities as they allocate capital for the long term.”
As reported above, Mercer NZ is on track to hit NZ$10 billion soon (although it will lose some KiwiSaver money later this year post the default scheme transition in December) while across Asia-Pacific the firm manages some A$46 billion, according to a spokesperson.