Manager change in MLC’s fixed
October 2017
Manager change in MLC’s fixed
income strategies
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This information is provided by MLC Investments Limited (ABN 30 002 641 661 AFSL 230705) as Responsible Entity and NULIS Nominees (Australia) Limited
(ABN 80 008 515 633, AFSL 236465) as trustee of the MLC MasterKey and Fundamentals Super and Pension and MLC MasterKey Business Super products
which are a part of the MLC Super Fund (ABN 70 732 426 024 (together “MLC” or “we”), all members of the National Australia Bank Limited (ABN 12 004 044
4397, AFSL 230 686) group of companies, 105–153 Miller Street, North Sydney 2060. An investment in any product offered by a member company of the
National Australia Bank group of companies does not represent a deposit with or a liability of the National Australia Bank Limited (ABN 12 004 044 937) or its
subsidiaries.
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This information may constitute general advice. It has been prepared without taking account of an investor’s objectives, financial situation or needs and
because of that an investor should, before acting on the advice, consider the appropriateness of the advice having regard to their personal objectives, financial
situation and needs.
Investors should obtain a Product Disclosure Statement or other disclosure document relating to any financial product which is issued by MLC, and consider it
before making any decision about whether to acquire or continue to hold the product. A copy of the Product Disclosure Statement or other disclosure document
is available upon request by phoning the MLC call centre on 132 652 or on our website at mlc.com.au.
Past performance is not a reliable indicator of future performance. The value of an investment may rise or fall with the changes in the market. Any projection or
other forward looking statement (‘Projection’) in this document is provided for information purposes only. No representation is made as to the accuracy or
reasonableness of any such Projection or that it will be met. Actual events may vary materially.
MLC relies on third parties to provide certain information and are not responsible for its accuracy. MLC is not liable for any loss arising from any person relying
on information provided by third parties. While MLC has taken all reasonable care in producing this communication, subsequent changes in circumstances
may occur and impact on its accuracy. The investment managers are current as at the date this communication was prepared. Investment managers are
regularly reviewed and may be appointed or removed at any time without prior notice to you.
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The following funds are affected by the changes to our fixed income strategies. These funds appear on MLC’s platforms, in addition to a number of external
platforms:
MLC Wholesale Horizon 1 Bond Portfolio
MLC Horizon 1 Bond Portfolio
MySuper
MLC Wholesale Horizon 2 Income Portfolio
MLC Horizon 2 Capital Stable Portfolio
MLC Horizon 2 Income Portfolio
MLC Wholesale Horizon 3 Conservative Growth Portfolio
MLC Horizon 3 Conservative Growth Portfolio
MLC Wholesale Horizon 4 Balanced Portfolio
MLC Horizon 4 Balanced Portfolio
MLC Wholesale Horizon 5 Growth Portfolio
MLC Horizon 5 Growth Portfolio
MLC Wholesale Diversified Debt Fund
MLC Diversified Debt Fund
Important information
•
We’ve appointed Muzinich & Co Limited (Muzinich) to manage part of our
global high yield bonds and loans allocation.
•
We've removed Oaktree Capital Management, L.P. (Oaktree), our US high
yield loans manager since 2005. While Oaktree has been a successful
contributor to our funds, we were looking for a broader global strategy.
•
Muzinich will give us opportunities to invest in high yield loans not only in
developed markets (US and Europe), but also emerging markets (Asia, Latin
America, Eastern Europe). Muzinich's capabilities extend to high yield bonds.
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•
MLC Diversified Debt Fund
•
MLC Horizon portfolios 1 to 5, and
•
MySuper.
What’s changed?
3
•
We actively manage our portfolios and evolve them as the investment
environment changes and opportunities arise.
•
We believe the new manager will give us access to a greater diversity of
investments and help improve the return potential for our fixed income
portfolios.
•
Muzinich's investment style, credit selection process and investment breadth
meet the current needs of our strategies.
•
Muzinich’s approach will complement our existing managers, Loomis and
Shenkman, which currently invest mainly in US high yield loans.
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•
We anticipate improved return potential for our fixed income portfolios
without a material change to their risk profile. This is due to
greater access
to
high yield investments across
regions and countries
.
Why we’re making these changes
4
•
At times when credit risks are appropriately compensated, these investments
can offer attractive returns for the risk taken.
•
Our allocation to this sector is therefore opportunistic and currently focuses
on high yield corporate bank loans.
Why do we invest in global high yield fixed income?
5
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These instruments are a
floating interest rate
source of funding issued by
companies rated below investment grade. They usually pay higher floating
rates of interest because they have a higher risk of default. Global bank
loans are secured, so are expected to provide better capital protection than
high yield bonds, which are typically unsecured.
•
These loans are particularly attractive in the current environment of low
interest rates. Being secured is an important feature as it means the loans
are considered ‘senior’ and take priority over unsecured bond investors.
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•
These are
fixed rate
bonds issued by companies that have a credit rating
below investment grade. They usually pay higher fixed rates of interest
because they have a higher risk of default and are unsecured.
What are global high yield loans and bonds?
6
In recent years and historically, these assets have at times performed strongly relative
to investment grade bonds. Despite the higher risk, the sector plays a
return-seeking
and
diversification
role in our strategies.
How has global high yield fixed income performed?
7
Source: NAB Asset Management Services Limited. The returns for global high yield loans and bonds are before deducting fees
and tax and are hedged to the Australian dollar.
In the current environment of low interest rates, the floating rates of interest
provide a premium above government bonds with less interest rate risk.
•
The company was founded in New York in 1988 by George Muzinich and is
owned by Muzinich family members and their trusts. George Muzinich is the
Chairman and CEO and his son, Justin Muzinich, is President.
•
Muzinich is an experienced manager specialising in credit assets (corporate
bonds and bank loans). Muzinich invests across a broad range of high yield
sectors in developed and emerging markets.
•
Muzinich has $44.8 billion of assets under management (at 30 June 2017).
•
The firm has a track record of constructing well-diversified, liquid high yield
bonds and loan portfolios which have produced strong relative performance.
Muzinich seeks to tactically allocate across a range of high yield sectors to
maximise investment opportunities, while protecting capital. Muzinich has
consistently met its performance objective while avoiding material losses.
•
When choosing securities, Muzinich applies a combination of top-down and
bottom-up proprietary credit research.
Who is Muzinich?
8
•
There’s no impact on fees for the following funds because they have fixed
investment fees:
‐
MLC Wholesale Horizon 1 to 5 and Diversified Debt portfolios in the
MLC Investment Trust and MLC MasterKey Unit Trust
‐
MySuper
•
There’s a very small reduction on fees for the following funds because they
have variable investment fees:
‐
MLC Horizon 1 to 5 and Diversified Debt portfolios available in MLC
MasterKey superannuation and pension platforms
•
Investment fees are available in the Fund Profile Tool on
mlc.com.au
and
mlcinvestmenttrust.com.au
•
For further information regarding fees please refer to the product PDS.
Are there fee implications?
9
What’s the communication plan?
10
Manager allocations in the global high yield fixed
income strategy
11
Note: Figures are rounded to two decimal places and based on target asset allocations.
This material provides important information about the manager change in MLC's fixed income strategies in October 2017. MLC Investments Limited and NULIS Nominees (Australia) Limited are highlighted as the entities responsible. The document emphasizes the impact on various funds and the appointment of Muzinich & Co. Limited to manage a portion of the global high yield bonds and loans allocation. Oaktree Capital Management, L.P. has been removed as the US high yield loans manager.
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Presentation Transcript
Manager change in MLCs fixed income strategies October 2017 This material is not for circulation to retail investors.
Important information This information is provided by MLC Investments Limited (ABN 30 002 641 661 AFSL 230705) as Responsible Entity and NULIS Nominees (Australia) Limited (ABN 80 008 515 633, AFSL 236465) as trustee of the MLC MasterKey and Fundamentals Super and Pension and MLC MasterKey Business Super products which are a part of the MLC Super Fund (ABN 70 732 426 024 (together MLC or we ), all members of the National Australia Bank Limited (ABN 12 004 044 4397, AFSL 230 686) group of companies, 105 153 Miller Street, North Sydney 2060. An investment in any product offered by a member company of the National Australia Bank group of companies does not represent a deposit with or a liability of the National Australia Bank Limited (ABN 12 004 044 937) or its subsidiaries. This presentation has been prepared for licensed financial advisers only. This document must not be distributed to retail clients (as defined in the Corporations Act 2001 (Cth)) or any other persons. This information may constitute general advice. It has been prepared without taking account of an investor s objectives, financial situation or needs and because of that an investor should, before acting on the advice, consider the appropriateness of the advice having regard to their personal objectives, financial situation and needs. Investors should obtain a Product Disclosure Statement or other disclosure document relating to any financial product which is issued by MLC, and consider it before making any decision about whether to acquire or continue to hold the product. A copy of the Product Disclosure Statement or other disclosure document is available upon request by phoning the MLC call centre on 132 652 or on our website at mlc.com.au. Past performance is not a reliable indicator of future performance. The value of an investment may rise or fall with the changes in the market. Any projection or other forward looking statement ( Projection ) in this document is provided for information purposes only. No representation is made as to the accuracy or reasonableness of any such Projection or that it will be met. Actual events may vary materially. MLC relies on third parties to provide certain information and are not responsible for its accuracy. MLC is not liable for any loss arising from any person relying on information provided by third parties. While MLC has taken all reasonable care in producing this communication, subsequent changes in circumstances may occur and impact on its accuracy. The investment managers are current as at the date this communication was prepared. Investment managers are regularly reviewed and may be appointed or removed at any time without prior notice to you. The funds affected by these changes The following funds are affected by the changes to our fixed income strategies. These funds appear on MLC s platforms, in addition to a number of external platforms: MLC Wholesale Horizon 1 Bond Portfolio MLC Wholesale Horizon 2 Income Portfolio MLC Wholesale Horizon 3 Conservative Growth Portfolio MLC Wholesale Horizon 4 Balanced Portfolio MLC Wholesale Horizon 5 Growth Portfolio MLC Wholesale Diversified Debt Fund MLC Horizon 1 Bond Portfolio MLC Horizon 2 Capital Stable Portfolio MLC Horizon 3 Conservative Growth Portfolio MLC Horizon 4 Balanced Portfolio MLC Horizon 5 Growth Portfolio MLC Diversified Debt Fund MySuper MLC Horizon 2 Income Portfolio 2
Whats changed? We ve appointed Muzinich & Co Limited (Muzinich) to manage part of our global high yield bonds and loans allocation. We've removed Oaktree Capital Management, L.P. (Oaktree), our US high yield loans manager since 2005. While Oaktree has been a successful contributor to our funds, we were looking for a broader global strategy. Muzinich will give us opportunities to invest in high yield loans not only in developed markets (US and Europe), but also emerging markets (Asia, Latin America, Eastern Europe). Muzinich's capabilities extend to high yield bonds. Which funds are affected? MLC Diversified Debt Fund MLC Horizon portfolios 1 to 5, and MySuper. 3
Why were making these changes We actively manage our portfolios and evolve them as the investment environment changes and opportunities arise. We believe the new manager will give us access to a greater diversity of investments and help improve the return potential for our fixed income portfolios. Muzinich's investment style, credit selection process and investment breadth meet the current needs of our strategies. Muzinich s approach will complement our existing managers, Loomis and Shenkman, which currently invest mainly in US high yield loans. How may clients benefit? We anticipate improved return potential for our fixed income portfolios without a material change to their risk profile. This is due to greater access to high yield investments across regions and countries. 4
Why do we invest in global high yield fixed income? At times when credit risks are appropriately compensated, these investments can offer attractive returns for the risk taken. Our allocation to this sector is therefore opportunistic and currently focuses on high yield corporate bank loans. 5
What are global high yield loans and bonds? Global bank loans These instruments are a floating interest rate source of funding issued by companies rated below investment grade. They usually pay higher floating rates of interest because they have a higher risk of default. Global bank loans are secured, so are expected to provide better capital protection than high yield bonds, which are typically unsecured. These loans are particularly attractive in the current environment of low interest rates. Being secured is an important feature as it means the loans are considered senior and take priority over unsecured bond investors. Global high yield bonds These are fixed rate bonds issued by companies that have a credit rating below investment grade. They usually pay higher fixed rates of interest because they have a higher risk of default and are unsecured. 6
How has global high yield fixed income performed? In recent years and historically, these assets have at times performed strongly relative to investment grade bonds. Despite the higher risk, the sector plays a return-seeking and diversification role in our strategies. Source: NAB Asset Management Services Limited. The returns for global high yield loans and bonds are before deducting fees and tax and are hedged to the Australian dollar. In the current environment of low interest rates, the floating rates of interest provide a premium above government bonds with less interest rate risk. 7
Who is Muzinich? The company was founded in New York in 1988 by George Muzinich and is owned by Muzinich family members and their trusts. George Muzinich is the Chairman and CEO and his son, Justin Muzinich, is President. Muzinich is an experienced manager specialising in credit assets (corporate bonds and bank loans). Muzinich invests across a broad range of high yield sectors in developed and emerging markets. Muzinich has $44.8 billion of assets under management (at 30 June 2017). The firm has a track record of constructing well-diversified, liquid high yield bonds and loan portfolios which have produced strong relative performance. Muzinich seeks to tactically allocate across a range of high yield sectors to maximise investment opportunities, while protecting capital. Muzinich has consistently met its performance objective while avoiding material losses. When choosing securities, Muzinich applies a combination of top-down and bottom-up proprietary credit research. 8
Are there fee implications? There s no impact on fees for the following funds because they have fixed investment fees: MLC Wholesale Horizon 1 to 5 and Diversified Debt portfolios in the MLC Investment Trust and MLC MasterKey Unit Trust MySuper There s a very small reduction on fees for the following funds because they have variable investment fees: MLC Horizon 1 to 5 and Diversified Debt portfolios available in MLC MasterKey superannuation and pension platforms Investment fees are available in the Fund Profile Tool on mlc.com.au and mlcinvestmenttrust.com.au For further information regarding fees please refer to the product PDS. 9
Whats the communication plan? Date Audience Communication Location/medium Mid October Advisers Strategy update presentation ENGAGE email from NAB AM, MLC News, NAB FP News Wrap and published on mlc.com.au and nabam.nab.com.au Mid October Advisers & clients Economic and market update video and Q&A ENGAGE email from NAB AM, MLC News, NAB FP News Wrap and published on mlc.com.au, and nabam.nab.com.au Mid October Advisers & clients Commentaries Commentaries in the Fund Profile Tool will include an overview of changes reflected in the asset allocations dated 30 September Late October Advisers Quarterly investment update (performance pack) Quarterly performance pack will include an overview of changes. Emailed to advisers in MLC News and published on mlc.com.au November Advisers & clients MySuper quarterly update and portfolio positioning Video and script on Plum.com.au News and insights page 10
Manager allocations in the global high yield fixed income strategy Manager MLC MLC MLC Horizon 2 Capital Stable Portfolio MLC Horizon 2 Income Portfolio MLC MLC Horizon 4 Balanced Portfolio MLC Horizon 5 Growth Portfolio MySuper Diversified Debt Fund Horizon 1 Bond Portfolio Horizon 3 Conservative Growth Portfolio % (change) % (change) % (change) % (change) % (change) % (change) % (change) % (change) Oaktree 0.00 (-0.75) 0.00 (-1.05) 0.00 (-0.23) 0.00 (-0.45) 0.00 (-0.23) 0.00 (-0.30) 0.00 (-0.30) 0.00 (-1.20) Loomis 1.75 (0.00) 2.45 (0.00) 0.53 (0.00) 1.05 (0.00) 0.53 (0.00) 0.70 (0.00) 0.70 (0.00) 2.80 (0.00) Muzinich 1.00 (1.00) 1.40 (1.40) 0.30 (0.30) 0.60 (0.60) 0.30 (0.30) 0.40 (0.40) 0.40 (0.40) 1.60 (1.60) Shenkman Capital Global high yield fixed income (as % of total portfolio) 2.25 (-0.25) 3.15 (-0.35) 0.68 (-0.07) 1.35 (-0.15) 0.68 (-0.07) 0.90 (-0.10) 0.90 (-0.10) 3.60 (-0.40) 5.00 7.00 3.00 1.50 2.00 2.00 8.00 1.50 11 Note: Figures are rounded to two decimal places and based on target asset allocations.
