The firm announced strategy capacity limits well in advance of implementation, allowing ample time to meet with clients to explain its thinking and answer any questions beforehand, such as why the strategy was closing, how the close would impact them and what it meant for other strategies. Educating clients about the decision helped them clearly understand MFS’ reasoning and that the choice was about them and protecting their assets. “We think about the long term: not only assets this year but the assets over time,” said MFS Senior Vice President, Global Product, David Connelly.
Initially, the firm did a “soft close,” which meant the strategy would be closed to new accounts, but existing clients could still add money. In 2013, MFS made the difficult choice to allow no new money to come in.
This was the first time in MFS history that the firm closed a major institutional strategy. But doing so, as current MFS President Carol Geremia noted, showed that “MFS was serious” when it said it had a client-first mentality.
Over the next few years and through the global financial crisis, MFS continued to monitor the strategy’s capacity on a daily basis through its ongoing conservative risk-review process that dates back to MFS’ founding in 1924. Through 2017 and 2018, MFS began reopening the Global Equity strategy on a limited basis. In early 2019, 13 years after MFS made the initial decision to close the strategy, the firm reopened it to all investors.
Capacity management is never about one single decision. Rather, it results from an ongoing dialogue through which MFS monitors capacity for all strategies on a regular basis as part of its thoughtful risk management process. “We view capacity management as an important risk management tool,” said MFS Chief Investment Risk Officer Joe Flaherty. “We close strategies in an attempt to preserve returns for investors.”
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