MLC Investment Management (MLC IM) has terminated its Australian equities mandate with Concord Capital, after nearly 15 years.

In total, Concord Capital managed about 5 per cent of the $11-billion Australian shares strategy.

The change will affect the MLC Horizon Series of portfolios, MLC Long-Term Absolute Return Portfolio and MLC Australian Share Fund.

About $400 million of the mandate will now be managed by Vanguard Investments, which received the mandate for its S&P/ASX 200 Index strategy.

The remainder of the funds will be reallocated over the existing managers.

The decision to terminate Concord was made largely to obtain a better diversification, MLC IM Australian equities portfolio manager Peter Sumner said.

"With the current concentration of shares in the S&P/ASX200 Index and the increased correlation between the returns of individual stocks, the opportunity for active managers has narrowed," Sumner said.

"As a result, in the past year many managers within the Australian market, including those used by MLC, are pursuing similar stock and investment themes - partly negating the benefits of blending different active manager styles."

Simply reallocating Concord Capital's mandate to the existing managers would not result in better diversification, he said.

"We believe an indexed portfolio will provide better risk characteristics for our strategies at this point," he said.

The index allocating in the diversified funds, including the MLC Horizon series, was likely to be permanent, he said.

But for the sector fund, the MLC Australian Shares Fund, the solution was temporary.

"We are not adopting a core-satellite strategy here. We still believe in active management," he said.

"When we see evidence of greater diversity in manager positioning, and genuine diversity of insight, adding an additional active manager is likely."

A forerunner of Concord was appointed in 1997, when the fund manager started as an Australian equities team at Lend Lease.

Concord was spun off in June 2000 following the sale of Lend Lease's financial services business to National Australia Bank.

In August 2010, Concord was bought by Invesco Australia.

But Sumner said the change of ownership had no impact on the decision to reduce MLC's exposure to the manager.

"When Concord was appointed, they represented about 6 per cent of the portfolio. They reached a peak in 2002 at 17 per cent and the exposure has since steadily declined," he said.

As part of the changes, the exposure to Wallara was increased slightly, as well as that of Northcape.