Merrill Lynch wins SERF mandate

Merrill Lynch Investment Managers’ (MLIM) portable alpha product has won an $85 million mandate from the Stevedoring Employees Retirement Fund (SERF).

SERF is the first external Australian client to invest in the Merrill Lynch Portable Alpha Investment Strategies LP, which uses the Morgan Stanley Capital International ex-Australia index as market exposure.

Portable alpha strategies separate the above-benchmark value added by the manager (the alpha) from the underlying market exposure of the benchmark (the beta). This provides investors with opportunities for enhanced returns while mitigating the risks of unwanted market exposure.

The concept of alpha has been around for a number of years but, according to MLIM managing director and co-chief investment officer Russell Maddox, many Australian funds have struggled with the difficulties of implementing such strategies.

“We believe that the Merrill Lynch Portable Alpha Investment Strategies LP is the most advanced, best thought out and most robust portable alpha product available in the marketplace,” Maddox said.

“Because we do not currently have the resources or the capability to conduct and manage a hedging program, the MLIM fund makes it possible for a portable alpha strategy to be implemented within our products,” said Terry Newson, chief investment officer of FuturePlus Financial Services, which advised SERF during the process.

“[It] allows us to tap into the best alpha sources available within MLIM globally without being exposed to the various beta of the underlying funds.”