MLC introduces currency hedging and increases allocation to global equity

MLC, the world’s third largest specialist manager of managers, has enhanced the asset allocation of its UK multi-manager portfolios by introducing currency hedging, increasing the allocation to global equity, and appointing two new global equity managers.
MLC’s products are offered through IFAs and branches of the Clydesdale Bank and Yorkshire Bank.

The enhancements are as follows:

MLC is reducing the risk associated with foreign currencies by hedging a proportion of the foreign currency exposure into pounds sterling

MLC multi-asset class portfolios will now benefit from strategic allocations to both hedged global equities (currency exposure removed) and unhedged global equities (currency exposure maintained)

StateStreet Associates have been appointed to manage the passive currency overlay across the MLC Portfolios

Coinciding with the reduction in foreign currency exposure MLC, has increased the strategic allocation to global equity within its multi-asset class portfolios. To this effect £78m has been transitioned from UK equity into global equity

The transfer of money into global equity is accompanied by the addition of two new global equity managers to the multi-manager line up; Walter Scott & Partners and Dimensional Fund Advisors. They join Capital International, Bernstein, and ABN Amro. All five managers will manage discrete segregated mandates on behalf of MLC’s clients

There are no changes to the Annual Management Charges on the MLC Portfolios as a result of these enhancements

Bobby King, head of investment strategy at MLC in the UK, said: “Reliance on Capital International, our original global equity manager appointed in 2001, has been reduced to 25% as part of the new strategy. We continue to hold them in the highest regard, but do wish to increase diversification across managers within the strategy.

“The enhancements to the MLC Portfolios are a significant development for our UK investors. By reducing the impact of currency we have been able to increase allocations to global markets which we believe will provide better risk-adjusted returns over the longer term compared to the UK.”

“We are not aware of any other provider in the UK providing strategic allocations to both hedged and unhedged global equities in a multi-asset class portfolio with regular re-balancing”

“We have for long favoured a more global approach to investing compared to the confines of a single market. By separating the currency decision from the stock selection decision, our global equity managers can concentrate on picking the best stocks regardless of where they are domiciled, whilst State Street Associates will look at the stock holdings across the portfolios and hedge exposures accordingly.”

“We are also pleased to appoint Walter Scott & Partners and Dimensional Fund Advisors to the global equity manager line up. Their addition improves the diversification of manager insight and they have been selected to complement the existing managers already in place.”