MFS Investment Management has closed its $46 billion core global equity strategy — a key to the firm's Asia-Pacific business — to new inflows from existing or prospective clients.
Company executives predict the firm's momentum in the region — where clients' share of MFS' total assets under management has more than doubled to 12% from the roughly 5% they accounted for in the run-up to the global financial crisis — will survive that “hard close.”
In a telephone interview, Carol Geremia, president of MFS Institutional Advisors Inc. and the Boston-based firm's co-head of global distribution, said MFS deliberately pursued a strategy narrowly anchored on core global equity as it moved over the past six or seven years to forge relationships with the region's top institutional investors.
More recently, however, a number of equity offerings — including global value, global growth, Asia ex-Japan and emerging markets equities — “are getting quite a bit of traction,” she noted.
MFS' initial strategy for the region called for “not spreading ourselves too thin, not trying to be everything to everybody,” she said.
Along the way, “one of the best calls we ever made” was to soft-close core global equity to new separate accounts in 2006, even as a number of prospective clients in Asia were kicking the tires, to show MFS would sacrifice asset gathering to ensure good performance, she said. At the time, the strategy's AUM stood around $21.6 billion.
External manager performance data provided by two big institutional investors in the region suggest considerable success on that front.
The latest annual report by Japan's ¥121 trillion ($1.25 trillion) Government Pension Investment Fund listed MFS as the GPIF's top-performing international equity manager. MFS' core global equity strategy was outperforming its benchmark by an annualized 388 basis points for the five years through March, while runner-up Amundi delivered annualized outperformance of 53 basis points.
In early September, the GPIF announced it had awarded an additional, undisclosed sum to MFS as part of a ¥159 billion combined allocation to eight firms, adding to the ¥250 billion MFS was overseeing for the fund as of March 31.
Separately, Taiwan's $54 billion Labor Insurance Fund listed MFS as its top-performing manager among three firms awarded identical $200 million mandates on Nov. 1, 2011. As of Aug. 31, MFS had delivered a 41.5% gain since inception, compared with a 28.4% increase by BlackRock Inc. and a 17.8% rise by Amundi.
Asked whether MFS' success for the year through June 30 — in boosting client assets in Asia ex-Japan by 59% to $7 billion; in Australia by 46% to $17.9 billion; and in Japan by 30% to 12.6 billion — could simply be a case of performance chasing by investors in the region, Ms. Geremia demurred.
MFS' relationships with the region's institutional investors have taken five to 10 years or more to forge — “bringing them value-added content ... sharing best practices” and giving them everything they need to understand in detail the firm's approach to managing money, she said.
Equipped with a thorough understanding of which market environments MFS does best in, those clients will “stick with us through thick and thin,” as the firm's superannuation clients in Australia did in 2003 when its high-quality stock focus was out of favor, she said.
