Mercer reshapes fund manager lineup for fixed income strategy

Mercer Australia has halved the number of fixed income fund managers in its sovereign bond fund strategy, retaining just Challenger Life and Macquarie Investment Management.

From December 1, Jamieson Coote Asset Management and Schroders Investment Management will no longer be part of the investment bench for the Mercer Australian Sovereign Bond Fund Class 1.

The strategy has nearly $2 billion in funds under management.

Mercer said it is changing the appointed external fund managers as a result of finalising a review that also included updating the fund's investment strategy, buy and sell spreads, and management fees.

Challenger Life and Macquarie Investment Management will oversee the new investment strategy, which will mean providing an exposure to Australian sovereign bond returns using an enhanced index, multi-manager approach. Previously, the fund provided exposure to Australian sovereign bond returns using a partially active, multi-manager approach.

It previously could use swap arrangements or other derivatives with one or more of the appointed investment managers. Moving forward, the fund will predominantly invest in funds or strategies incorporating swap arrangements or other derivatives to deliver these returns.

Management fees will fall from 0.35% p.a. to 0.28% p.a. The buy and sell spread will go from 0.02% and 0.03% respectively to 0.03% and 0.04% respectively.

Also from December, the fund's name will change to the Mercer Australian Sovereign Bond Fund Index Plus.

The restructure will include a change of name of the Bloomberg AusBond Treasury 0+ Yr Index (All Maturities) to the Bloomberg AusBond Treasury 0+ Yr Index.

The Class 1 fund requires a minimum initial investment of $500,000.

The latest announcement forms part of Mercer's sweeping changes across its strategies and fund manager lineup, which have included changes to its Global Listed Property Fund as well as Australian equities and small-cap mandates.

Earlier this year, Mercer culled numerous fund managers overseeing its international shares strategies following a strategic review that included retaining Schroders Investment Management and awarding mandates to two new fund managers.

That restructure affected the Mercer International Shares Fund and Advance International Shares Fund.