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Au revoir MLC

Australian-based fund manager MLC has decided to exit New Zealand following the collapse of its proposed joint venture with National Mutual.

Monday, June 8th 1998, 12:00AM

by Philip Macalister

Australian-based fund manager MLC has decided to exit New Zealand following the collapse of its proposed joint venture with National Mutual.
Former New Zealand manager Andrew Kurac says part of the attraction of the failed venture was that MLC would acquire extensive distribution for its range of unit trusts through the National Mutual networks, including its adviser force.
Also the MLC funds and management philosophy generally were complimentary to National Mutual's.
Kurac says there are three major reasons for pulling out of the New Zealand market, namely;

  • Difficulty reaching critical mass
  • Taxation and legislative hurdles
  • The impact of master trusts
MLC has been a lean operation in New Zealand, employing a couple of people and offering just four of its Australian-based funds. The best known of those trusts was the MLC Platinum International fund that is managed by Kerr Neilson.
Kurac says to compete with the big boys MLC had to offer more funds and have wider distribution, however now the joint venture had been canned it was unlikely MLC was going to reach critical mass and become a major player.
Like other Australian managers MLC is reluctant to disclose how much money it has taken in New Zealand. Kurac will only say that it is "quite a lot higher" than $50 million in total.
He says the move by advisers from retail funds to master trusts which use only a selected number of wholesale funds, has been putting great pressure on managers.
On the tax front he says the absence of a capital gains tax in New Zealand tends to make investors chase funds with higher returns.
"There is no capital gains tax in New Zealand which means that investors tend to be more performance orientated," he says. "Capital gains tax stops them moving money around."
All these restricting factors meant that MLC was never going to be more than a niche player in New Zealand and that does not fit with the company's philosophy of being a major player in major markets.
He says once the current prospectus expires in October MLC will stop accepting new money from New Zealand investors. People with investments in MLC funds will continue to be serviced from Australia, but support to the advisory industry will cease.
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