Q&A: MLC's Jonathan Armitage

MLC had approximately A$101 billion ($72 billion) in assets as of June 2018. It has a 20.5% alternatives allocation, comprising private equity (5%), infrastructure (2%), unlisted real estate (6%), alternative beta (5%), and insurance-related investments (2.5%). 

Q: What do you expect to be the major investment themes for 2019?

A: The management of risk in portfolios is going to be a key element in the next period as well as dealing with lower expected returns.

Q: What is your private equity exposure by geography? Which markets performed best in 2018?

A: Our portfolio is well diversified with roughly 50% in the US, 25% in Europe and 25% rest of the world. In 2018 the US, Europe and Australia all performed very strongly, with the weakness being in emerging markets, which were affected by both trading performance and currency impacts.

Q: How do you factor the potential for tech-driven disruption and transformation across a range of traditional industries into your investment thesis?  

A: We believe that private markets investing, in particular VC, gives us a real edge in seeing both innovation and where tech-driven disruption might be coming from. This information can help inform investment decisions we make in other asset classes such as infrastructure and public equities. This integrated approach across asset classes is an important part of the way we run our diversified offerings.

Q: What resources do you have outside of Australia? How much of a difference does this make in terms of accessing segments such as US venture capital?

A: We have one third of our private markets team based in the US. Our culture is that we run one global portfolio and so we have never wanted regional silos that often occur when you open global offices. Our expansion has been done thoughtfully to ensure our differentiated approach of operating as one global team remains. We have been fortunate to access great venture capital managers for a long time. We believe this is done by differentiating ourselves and our capital and showing we are long term, stable investors. These factors are probably more important than location.

Q: Are you becoming more active as a co-investor? What have been the implications of this for internal resources?

A: We have been co-investing globally at MLC for over 13 years and there has always been a focus on hiring people that have a direct investment background. Whilst this is becoming more popular today, our team has deep experience in this space and has invested through different cycles. We aren’t making changes, but we are focusing on opportunities that we expect to perform well through the cycle.

Q: Would you consider going into deals without a portfolio GP or with a fund-less sponsor?

A: We never say never, but the bulk of what we do is alongside our managers that require additional capital or our knowledge and expertise on a deal.

Q: Does the increased appetite among Australian LPs for direct investment and co-investment represent structural or cyclical industry trend?

A: The structural trend of changing the way large investors access all asset classes has been ongoing for a number of years and private markets was probably the last asset class to be impacted. I think that is because the dispersion of returns within private markets is much higher than other asset classes and so the cost, if you get it wrong, can be very high. It’s important not to be just taking on more risk when making co-investments.

Q: To what extent do ESG issues factor into your manager selection process? 

ESG is a highly important part of our process. We strongly believe that it is important to be making money in the right way, or returns will not be sustainable.

Armitage will be a keynote speaker at the AVCJ Australia & New Zealand Forum, which takes place in Sydney on March 5-7. For more information, go to www.avcjausnz.com

 

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• Topics
• Australasia
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• MLC Private Equity