SERF awards MLIM $85m portable alpha mandate
| Sep 5th, 2006 | Filed under: Portable Alpha & Alpha/Beta Separation | By: Alpha Male |
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By: Michelle Baltazar, The Financial Standard
Published: September 4, 2006
Merrill Lynch continues its pioneering ways with the introduction of its hybrid busines model – seamlessly integrating alpha-centric investing into its traditional business model (see previous post on this phenomenon). Is MLIM now 100% hedge fund or 0% hedge fund?
Excerpts:
“The $1.5 billion Stevedoring [Australian Port Workers] Employees Retirement Fund (SERF) has awarded Merrill Lynch Investment Managers (MLIM) an $85 million institutional mandate to invest in a portable alpha strategy with a twist.
“Under the mandate, MLIM’s US based portable alpha team will select a combination of managers handpicked from the group’s 120 internal investment teams to get the best alpha returns for their clients.
‘The Merrill Lynch Portable Alpha Investment Strategies LP allows us to tap into the best alpha sources available within Merrill Lynch Investment Managers globally without being exposed to the various beta’s of the underlying funds,’ said FuturePlus’ general manager, Terry Newson.”
…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, he said.
“The fees charged will vary according to the mandate and complexity. ‘Typically, MLIM looks to charge somewhere between one-quarter and one-third of the alpha generated, structured as a flat fee, a performance fee or a combination thereof,” said [MLIM's managing director and co-chief investment officer Russell...] Maddox. For example, if the client gains a 4 per cent alpha return on top of their nominated benchmark, MLIM would get between 1 to 1.33 per cent.
“Investors are able to save by paying this one-off fee, regardless of how many fund managers the Portable Alpha team uses to underpin the mandate. Usually they would have to pay external fund managers separate fees depending on the mandate while for us it’s that just that one fee, said Maddox.
[...] Regular readers might recall this posting from last fall about Merrill Lynch’s fee structure for portable alpha mandates.  At the time, Merrill officials said: “Typically, MLIM looks to charge somewhere between one-quarter and one-third of the alpha generated, structured as a flat fee, a performance fee or a combination thereof.” [...]