Update On Changes To Operations - DMG Diversified Portfolio
At DMG, we continue to work hard on ensuring that the DMG Diversified Portfolio (DMGDP) continues to deliver on its aims and that all the parties involved are a good fit with our investors, clients and ourselves. There have been a few changes recently, with more to come.
We commit more resources to the DMGDP
Part of the process has been for us to dedicate more resources to the operational side of the portfolio. Simone Belcher & myself are allocating part of our working week solely to the DMGDP. For Simone this will be at least 4 days per week and I will be 2 -3 days and this will increase as required.
Some background
To operate a managed fund there are a number of roles that need to be filled and legal requirements to be met. Broadly there is the compliance/admin/management side and the investment management side. When the portfolio was established we partnered with Select Investment Partners in Sydney who acted in both aspects and engaged other parties to play various roles. That all worked well until they were taken over by OneVue. It appears that OneVue chose to operate the former Select business in a different manner and a number of Select team members, who we rated very highly, left the organisation. There were also operational issues that caused us concern.
We take our role very seriously and saw the need to make changes
We are very determined and committed to ensure the DMGDP provides an excellent outcome for clients and investors. This means both in terms of performance and also the service it delivers. This latter point can be as simple as ensuring that withdrawals are processed in an acceptable time frame. In the end a decision was made to change some of the service providers. Here is a summary;
Responsible Entity (RE). This is the party responsible for ensuring that the fund and parties involved operate in the best interests of investors. It sits above the day to day operations and has a high level oversight role.
We reached an agreement for the early exit by OneVue from their contracted RE role. Equity Trustees (EQT) have replaced them. This was approved at a meeting held on Friday 27th May.
EQT have been excellent, and their knowledge, experience and practical approach has been a source of great support and provides us with a lot of confidence about our relationship with them.
Custodian, Fund Administration and Unit Registry. This party makes sure that the money ends up where it should, they calculate the unit price, process applications and withdrawals, handle reporting to investors and other tasks.
BNP Paribas have changed direction and are no longer a good fit with us and pleasingly we have found an excellent replacement. Again we have been able to negotiate an early exit to their contract, however the end of financial year obligations mean that this will not occur until late July/early August.
We are in the process of preparing contracts and a Service Level Agreement with FundBPO to fulfill these roles. The Service Level Agreement will document the requirements placed on FundBPO in providing their services. We have been working with them as part of the transition process for some time and have been very impressed with their approach, thoroughness and commitment to meeting our expectations. Again FundBPO are more suited to us and our clients.
Investment Management & Asset consulting
These roles were undertaken by Select and ourselves, and we will assume full responsibility from late August. Our relationship with Select/OneVue will completely cease at that point. Bart Dowling, whom some of you will have met, will lead the portfolio research and construction at the fund investment level with support from myself and Lonsec, an external research firm.
We are delighted to have secured Bart as part of our team. This was a priority for us when negotiating the exit from our current arrangements. Bart has extensive experience both in Australia and overseas in New York and London. He provides great confidence to us with his knowledge and ability to draw on his experience from decades in the financial markets at a high level. We are fortunate to have him working on our portfolio.
As investment manager we have responsibility for the day to day operations and management of the DMGDP. We manage the cash, monitoring it most days of the week, oversee the portfolio research and construction processes – investment committee meetings, decisions, policies, placing investments, redeeming investments, producing the documents and reports you see on our website. We are responsible for client services, so if the Financial Planning team needs assistance they can contact Simone or myself. Having us so readily available is a big benefit for the Financial Planning team and our clients.
What about performance?
It is important to note that the portfolio is still delivering on the level of protection it is providing to investors and significantly outperforming the ASX 200 in down months. This was proven again during the recent Brexit sell down during the initial market falls. Our alternatives delivered as they should and provided positive returns to offset part of the share market falls. One example of our commitment and ability to respond was on the Monday after Brexit, we met with Bart via the phone to discuss the portfolio and our possible next steps.
The new arrangements will be very beneficial to clients and investors. There will be more resources dedicated to the operations of the portfolio. We remain very focused on protecting investors capital as best we can and still achieving our performance targets.
If you would like know more or have any questions please feel free to ask Simone or myself.
By Gary Lucas, DMG Diversified Portfolio.