Australian asset manager, Macquarie Investment Management, is launching into the UK workplace pensions market with its fee-free True Index strategy.
This strategy has been available to Australian DC schemes for 20 years. If offers a range of index-tracking options covering various geographic regions and asset classes.
The solution aims to deliver an exact index return for no management fee. To achieve this there are two element to these products: one is a tracking index portfolio, which aims to achieve a small but consistent outperformance. The second element is a swap, which pays the actual return of the index to the client on a daily basis.
If the managers outperform then Macquarie will profit, in cases of underperformance the investment manager will pay the client the difference, via the swap.
Macquarie say this solution provides clients with a fresh approach to indexing, with exact returns, no fees, flexibility to invest across a range of asset classes and geographies and a robust, multi-layered risk management approach.
Scot Thompson, co-head of Macquarie systemic equities team says this strategy has delivered consistent returns in Australia, enabling pension funds to deliver fee-free market returns for clients for core parts of their portfolio.
The company currently has two mandates in the UK, and is looking to expand on this. As of March this year Macquarie had global AUM of £299.7bn.
It is working with the investment platform Mobius Life to allow pension schemes and their advisers to access and tailor investment strategies to meet client objectives. Via this partnership Macquarie working with one UK pension scheme to provide a bespoke pooled global equity True Index solution.
Thompson says there were many similarities between the Australian market, and the current UK workplace pensions market, where DC schemes are becoming the primary source of retirement income for most UK citizens.
The Australian market has been dominated by DC schemes since the 1980s, and the consolidation of funds and a greater focus on reducing fees from both the regulator and the market has resulted in growing demand for products like True Index, Macquarie says.
Thompson adds: “Trustees are under pressure to deliver sophisticated solutions with low fees to their participant. We are delighted that we can now offer our time-tested solution to pension plans in the UK.”
Thompson says these strategies can also be used to deliver ESG indices at zero cost. “It will depend on the specific index chosen, but if clients are happy with many of the broad ESG indices out there, such as the MSCI Carbon leaders, then we can deliver this in a True Index format, providing the owners of these indices are not charging outrageous fees to use them.”
Part of Macquarie business is also involved in more Alpha-focused strategies and it has a track record of investment in alternative assets such as infrastructure and real estate.
Thompson adds: “For some asset owners in Australia we can design bespoke index solutions, rather than shoehorn different existing indices into one portfolio. These bespoke solutions are often used by the Superannuation funds and Sovereign Wealth funds.
Mobius Life is an independent provider of investment administration services to UK pension schemes.