Inside Money: ASB looks to Mercer as in-house team departs

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Owner of the country's largest KiwiSaver scheme, ASB, has ditched the remnants of its in-house investment management team, outsourcing asset allocation duties to Mercer.

It is understood that most of the four-person ASB investment team, branded as First State Investments NZ and headed by Ainsley McLaren, has left the business with one executive transferring to the banks's subsidiary insurance firm, Sovereign.

ASB down-scaled its in-house New Zealand investment resource a number of years ago, as the Australian parent, the Commonwealth Bank of Australia (CBA), assumed greater control over the enterprise.

First State Investments NZ advised on investment strategies for ASB funds and the Sovereign insurance pools but the final decision on where the funds invested was understood to emanate from the Australian HQ.

While ASB offers a number of investment options, the group's KiwiSaver schemes represents the bulk of the bank's retail funds under management.

With almost $3 billion under management and close to 400,000 members, ASB KiwiSaver is also by far New Zealand's biggest single scheme, sustained by its status as a default provider and powerful bank distribution capacity.

However, the underlying investment strategy is based on a relatively simple index 'passive' investing model spread across several asset classes. According to the latest ASB KiwiSaver investment statement, Colonial First State Australia (CBA's funds management subsidiary) manages cash, New Zealand fixed interest and Australasian equities on behalf of the scheme.

FirstChoice, ASB's other KiwiSaver scheme that stopped accepting new members last September, also switched to a passive investment style for most of its funds.

According to sources, Mercer, which also operates a default KiwiSaver scheme, will now supply asset allocation advice to the ASB investment business.

ASB was not available for comment prior to press-time.

Meanwhile, industry rumours have been circulating around prospective start-up New Zealand investment firm, Castle Point Funds Management.

However, Stephen Bennie, one of the four Castle Point founders, says the news of the firm's demise has been premature.

Bennie says while the launch has "taken longer than we envisaged", Castle Point still aims to get a fund up and running.

Castle Point, which was launched by former Tower investment staff made redundant following the group's purchase by Fisher Funds, is attempting to carve out a niche in the highly-competitive trans-Tasman institutional equities space.