What is the Managed Income Portfolio Service (MIPS)?
MIPS is the professional fixed income management business unit within FIIG Securities that is available to clients who qualify as ‘wholesale’ and have a minimum of $500k of capital to invest.
- MIPS clients each own a stand-alone individually managed portfolio (IMP) managed by the MIPS Portfolio Management Team (PMT) in accordance with the MIPS Program selected by the client.
- All investment decisions for the IMP are made by the PMT in accordance with the selected program’s remit.
- The service currently offers three unique investment programs, designed to appeal to a broad range of investor appetites, and a fourth opportunity of customisation of investment mandates for investment in excess of $5m.
- All programs only invest in Australian Dollar denominated bonds and contain no derivative exposure.
- MIPS has been in operation since October 2015 and has delivered a performance record of merit.
The Managed Income Portfolio Service (MIPS) as an investment manager, is independent of FIIG Securities but MIPS clients benefit from the product design advantages and infrastructure that FIIG Securities provides.
What differentiates MIPS from other fixed income investment managers?
The service combines a number of unique attributes built by FIIG Securities to ultimately deliver clients professional management of a stand-alone (IMP) account that contains a highly diversified portfolio of assets that are directly owned, the income from which can be either distributed or re-invested, as instructed by the investor.
FIIG’s unique attributes include:
- Secondary market access to volumes less than $500k face value ownership (as low as 10k) via FIIG’s ‘Direct Bond’ Service.
- Primary market access to high yield assets via FIIG’s Debt Capital Markets (DCM) Origination Service and guaranteed allocation without obligation to commit.
- Access to both external and in-house (FIIG Securities) research.
- Liquidity for investment grade assets via the interbank market.
- Liquidity for non-investment grade product via FIIG Securities distribution platform.
Who are the MIPS Investment Management Team?
The MIPS Portfolio Management Team (PMT) are very experienced and seasoned fixed income market professionals.
- Kieran Quaine is the Head of MIPS and is the Senior Portfolio Manager. He has over 30 years’ of extensive experience within the fixed income market, primarily as fund manager in charge of investing multiple billions of dollars across a wide range of investment mandates.
- Megan Romeo is the Assistant Portfolio Manager. She has over 8 years’ experience in the financial markets, primarily, prior to the current role, as the Valuations Product Manager at S&P Capital IQ.
Refer to our website for an in-depth profile on our full team, including that of our Head of Distribution and our Product Manager.
What visibility will I have over what the Investment Manager is doing?
MIPS provides you 24/7 read only access to the portfolio - its composition, transaction history and daily valuation via the MyFIIG online portal.
In addition, as a client of our Managed Income Portfolio Service, you will receive a quarterly report outlining the investment manager’s future strategy and a commentary on recent economic events including drivers of current performance.
Explain what an IMP is and how it is different from a trust structure?
An IMP, or Individually Managed Portfolio, is a stand-alone vehicle in which a singular clients assets reside.
- Those assets within the IMP are still held in safe custody with FIIG as the custodian and JP Morgan as the sub-custodian.
- Assets within a client’s IMP are segregated from any and all other investor holdings, including the assets owned by FIIG Securities.
Conversely, within a trust structure, assets are pooled or aggregated, and investors own units in the trust. Their entitlement to ownership is not ‘direct’ but a share of the pool.
What are some of the advantages of an IMP over a trust structure?
In various circumstances, trust unit holders will always have less control over their asset performance than IMP holders. This is simply because as the owner of the IMP you can ultimately dictate various terms in those circumstances.
- Where an asset class is under pressure, and speculation that devaluation will continue, a ‘run’ on a trust is not uncommon. In such a period the Investment Manager may be forced to sell assets (that can be liquidated) at devalued prices to satisfy that percentage of unit holders who have demanded an exit. The ‘run’ can be self-fulfilling and deliver a devaluation that would not otherwise occur. Think of the GFC period. If you were in the minority, your valuation (of your share of the retained position) will be affected. But probably more significantly, the assets that are sold to satisfy liquidity may deliver an ‘unbalanced’ portfolio.
- Conversely, during an equivalent period to that described above, holders of an IMP will not experience such a ‘run’ and can effectively determine their next move in isolation and for their sole benefit.
It is worth noting that in circumstances where FIIG Securities ceased to operate, or even exist, client assets held directly, whether in an IMA or a standard FIIG Securities Direct Bond account, are protected because the assets are held in safe custody (with FIIG Securities as Custodian, but with JPM as sub(safe)-custodian).
How does MIPS fit within the wider FIIG Business?
MIPS is a segregated business unit owned by FIIG Securities that operates in stand-alone, segregated completely from the broader FIIG Securities brokerage business by ‘Chinese Walls’. However, that does not preclude MIPS from transacting with FIIG Securities for the advantage of MIPS clients. MIPS also deals with the broader investment banking community.
- Segregation between MIPS and FIIG Securities is in place to avoid conflicts of interest, ensuring that the decisions made by the portfolio manager are in your best interests.
- MIPS deals with FIIG Securities where the MIPS value proposition seeks to take advantage of the key attributes of FIIG Securities Product design, being the direct bond service, parcel sizes below $500k (as low as $10k), and DCM (primary) lead bond deals.
- MIPS also deals with the broader Wholesale bank market (the treasury product distribution arms of domestic banks and international investment banks) when seeking optimal and efficiently priced distribution of investment grade, highly liquid assets.
Can you please explain those dealing relationships further?
MIPS deals with FIIG Securities, when:
- Investing in bonds originated by their DCM team in ‘Primary’ or on the issue date.
- Investing or divesting in DCM team originated bonds in secondary (post issue date), as FIIG Securities is the only distribution platform transacting in those assets.
- Investing or divesting in other (investment grade bonds) in parcel sizes below $500k.
MIPS deals with the broader investment banking community when:
- Investing or divesting in investment grade bonds in parcel sizes above $500k.
- Because MIPS aggregates all investment grade investor demand and supply when dealing for all IMP’s under its management service, most investment grade transactions undertaken by MIPS are with counterparties external to FIIG Securities.
Does that mean that if something happens to FIIG Securities are my bonds safe?
Yes. Your bonds do not form part of FIIG’s assets.
FIIG as custodian holds the assets under an account in your name which will recognise your asset holdings. You retain 100% beneficial ownership of your bonds. This means that your bonds are your assets at all times and do not form part of the assets of FIIG or the custodial bank. If FIIG or JP Morgan as the sub-custodian were to cease operations, your bonds will be safe and remain yours.
FIIG holds your assets as bare trustee either in our name or in the name of a sub-custodian or a Securities System (as appropriate). The beneficial interest in your assets is held by you. FIIG and JP Morgan acknowledge and confirm that the beneficial interest in your assets held under custody in accordance with the Client Custody Agreement shall, at all times, vest in you. In that regard, either party are unable to affect the 100% beneficial ownership of your assets.
As a licensed custodian, FIIG Securities is required to maintain net tangible assets of greater than $10 million at all times.
What Investment Programs are available?
The Investment Programs offered are designed to appeal to a broad range of risk and return appetites. Higher yield, but also higher risk, is derived by a higher allocation to non-investment grade assets. Risk is however mitigated by a high degree of diversification.
A portfolio will contain a minimum of 20 unique names once cash is deployed to match the preferred exposure of the sample portfolios. All programs provide the investor with the option to distribute income (coupons) to an external bank account, or reinvest.
In order of lowest to highest yield (and income), MIPS Programs include:
- ‘Conservative Income’: is comprised of assets that are 100% Investment Grade. A maximum of 20% of that Investment Grade exposure can be ranked Subordinate in the capital structure.
- ‘Core Income’: is comprised of a minimum of 75% Investment Grade and a maximum of 25% Non-Investment Grade assets. 100% of those assets must rank senior in the capital structure.
- ‘Income Plus’: is our high yield flagship investment program. It can contain a maximum of 75% Non-Investment Grade assets of which a minimum of 55% must rank senior in the capital structure.
Refer to the website for a guide as to the current yield to maturity achievable.
What is the breakdown of the management fees for each Investment Program?
Conservative Income and Core Income management fees are 0.65% pa whilst the Income Plus management fee is 0.85%.
Fees for a Customised Investment Program are by agreement.
Custody fees are 0.20% for the first $500k and fall to as low as 0.06% for larger amounts.
I’m interested in becoming a client of the Managed Income Portfolio Service, how do I do that?
Please contact Marcus Blake, Director of Distribution: Marcus.blake@fiig.com.au
Marcus will facilitate account opening and other necessary administration that must be completed. Some administration can be pre-populated for you if you are an existing client of FIIG.
Can I open an account in a vehicle other than my own name eg. a beneficial trust?
Yes. MIPS accommodates various ownership vehicles, including:
- Singular and dual owner name
- SMSF
- Trust
- Corporate
Can I have multiple Investment Portfolios?
Yes, as long as you meet the minimum investment volume criteria for each separate account. Note that you will require a separate Macquarie Bank CMA (Cash Management Account) for each MIPS Investment Program opened.
I am already a FIIG Securities client. Can I transfer bonds into my MIPS Portfolio Account?
Yes, this is called an ‘in-specie transfer’.
If you hold assets that are not in our programs, we may still take them (where requested) and deliver exit price efficiency as we rebalance your portfolio. All assets must be in Australian dollars.
I have just opened a MIPS portfolio account, can I choose my own Bonds?
No. You can subscribe to one of three unique investment programs. Bonds are selected by the portfolio management team, and will be subject to change over the life of your investment.
However, if you have capital in excess of $5m to invest, you can choose to customise your investment mandate.
Why is it more efficient for MIPS portfolio team to rebalance your portfolio?
For two reasons:
- Interest accrual benefit - by holding exposure to the assets provided by you, whilst seeking opportunity to substitute with preferred assets at an optimal price and in the required volume, will generally be preferable to holding cash.
- Securities liquidated by MIPS will achieve a price very close to valuation whilst if done by yourself, will likely be subject to a brokerage fee.
Can I, subsequent to subscribing, reduce the capital value in my account?
Yes, subject to the following;
- You need to ensure the remaining asset value is greater than or equal to the minimum investment amount for your program.
- You must be aware that the PMT will subsequently need to rebalance your exposure appropriately.
- Rather than simply selling one or more bonds, the PMT needs to rebalance the exposure to every single bond held. This is achievable, and indeed facilitated by the Direct Bond service value proposition, but it is best that investors determine their capital investment into MIPS with a longer rather than a shorter term focus.
If choosing to withdraw capital you will be required to fill out and return the MIPS Withdrawal Form to clientservices@fiig.com.au. Contact your CRM to receive a copy of this form.
How do I add more funds to my MIPS account?
Deposit the funds into your CMA and advise your client relationship manager (CRM) so the Investment Manager can prepare to invest the additional funds.
Can I subsequent to subscribing, reduce the capital value in my account?
Yes, subject to the following;
- You need to ensure the remaining asset value is greater than or equal to the minimum investment amount for your program.
- You must be aware that the PMT will subsequently need to rebalance your exposure appropriately.
- Rather than simply selling one or more bonds, the PMT needs to rebalance the exposure to every single bond held. This is achievable, and indeed facilitated by the Direct Bond service value proposition, but it is best that investors determine their capital investment into MIPS with a longer rather than a shorter term focus.
If choosing to withdraw capital you will be required to fill out and return the MIPS Withdrawal Form to clientservices@fiig.com.au. Contact your CRM to receive a copy of this form.
Why can’t I just withdraw capital from my Cash Management Account (CMA) when I wish?
The MIPS PMT have control over your CMA because your cash holdings are part of your portfolio serving as the funding vehicle for investment. Those cash holdings will rise and fall as a function of investment and divestment activity of the PMT. Unscheduled cash withdrawal can impede the ability of the PMT to manage your IMA consistent with the investment strategy.
How Can I change my Investment Mandate?
Once subscribed to any investment program, clients of MIPS can switch programs either in entirety or partially, so long as the minimum subscription for each new program is met.
A new application will need to be completed in order to open a new mandated MIPS account including the establishment of a new Macquarie CMA account if you are subsequently retaining multiple investment programs.
What is the ‘re-investment’ option?
In regard to income that is paid by bonds, in the form of coupons, each MIPS investor has the option to either:
- Distribute that cash flow directly to an external account
OR
- Retain the cash flow in the CMA for reinvestment.
Those seeking to spend their income would choose to distribute, whilst those seeking to build their wealth would opt to re-invest. You can set your re-investment option during the account opening phase.
How can I change my re-investment option?
Please complete the MIPS Change of Details Form or email a request through to ClientServices@fiig.com.au including the bank account details.
Where can I access my statements? Can my advisor or accountant also access these?
Statements will be emailed to your nominated email every month. You or your authorised representatives (e.g. accountants & advisors) can also access FIIG statements on your MyFIIG portal.
Why can’t I reconcile my cash against the trades executed for that day?
Trades settling on the same day are netted as one payment, i.e if client has a $10,000 purchase and a $40,000 sell settling on the same day, they will see a deposit of $30,000 into the Macquarie CMA.
How do I get a bank statement for my Cash Management Account from Macquarie?
Macquarie statements can be accessed via the online Macquarie portal. Please visit https://www.macquarie.com/au/personal/
How do I access Macquarie’s online portal?
If you do not have the details for your Macquarie online portal, please contact Client Services on 1800 01 01 81 or email ClientServices@fiig.com.au who will in turn contact Macquarie on your behalf. Alternatively, you may contact Macquarie on 1800 806 310.
Do I receive interest on funds in my Macquarie CMA?
CMA accounts with a balance above $5,000 will receive 1.30% pa*. *Interest rates are subject to change so please visit https://www.macquarie.com/au/personal/bank-accounts/cash-management for the most up to date rate.
What will happen if my Wholesale certificate expires?
Clients will be contacted two weeks prior to the expiry date to renew the Wholesale certificate. In the event the certificate cannot be renewed, the assets held in your MIPS portfolio can be transferred to a Direct Bond portfolio.
Can I add data feeds to my account (by example Class Super and Xplan)?
Yes. Please have your accountant or advisor contact ClientServices@fiig.com.au to set this up for you.
Is there any GST on the CMA rebate payments from Macquarie Bank?
No, there is no GST applied to commission rebates, and no tax invoice is issued. Payment is treated the same as any interest.
How do I change personal details on my account?
Please complete the MIPS Change of Details Form or email a request through to ClientServices@fiig.com.au including the bank account details.
What is the liquidity of the various programmes in ‘normal’ market conditions?
Exiting the investment program is done on a best efforts basis to get you the best execution price possible. However if you need to exit the investment program urgently we can consider a more aggressive exit approach.