AXA Investment Managers (AXA IM) yesterday announced that Mercer’s investment business in Australia (Mercer) has allocated A$150 million to AXA IM’s global investment grade SmartBeta credit strategy.
Mercer’s allocation to AXA IM’s SmartBeta credit strategy complements other managers within their global credit portfolio, enabling Mercer to achieve a cost-efficient and well-diversified global credit exposure without the drawbacks of market capitalisation index tracking strategies.
Craig Hurt, AXA IM’s Director of Australia and New Zealand said local funds were taking notice of these intelligent, yet cost-efficient solutions:
“Since bringing our SmartBeta credit and SmartBeta equity strategies to the Australian market we’ve seen an increasing number of institutional investors look for a more intelligent and pragmatic approach to capture the market return,” he said.
AXA IM’s SmartBeta credit strategy takes an active approach to defining the investment universe, providing Mercer with a more attractive risk/return profile than that offered by passive index tracking strategies.
From a universe of bond investments determined by a number of rules-based and fundamental filters, AXA IM’s diversified portfolio is constructed such that it is not unduly exposed to either systemic or event risk at an issuer, sector or regional level. Using relative value analysis, those bonds that are deemed to offer the best value are equally weighted in the portfolio. Given the purchase price of a bond is critical to the overall return of a buy and maintain strategy, this approach maximises the beta of the portfolio over the longer-term.
Unlike index tracking, SmartBeta credit takes a pragmatic approach to portfolio construction and aims to buy well (the fewer issues that have to be sold before maturity the better), diversify intelligently to minimise exposure to risks, and implement efficiently as unnecessary or high transaction costs can destroy returns. AXA IM now manages over $2.5 billion in SmartBeta equity and $1.8 billion in SmartBeta credit.*
“AXA IM has a long and solid track record of managing buy and maintain type strategies and we anticipate further interest in these solutions in the year ahead. Our SmartBeta strategies are gaining significant traction amongst the post-retirement investment options offered by local funds given their focus on effectively harvesting beta while also seeking to minimise losses,” Mr Hurt concluded.