Stories abound about US and UK managers, who have provided the core of the offering of global and other international strategies to Australian investors for decades, being loath to set up shop in Australasia any more. It may be a great place to visit, especially during the northern winter, but it’s an increasingly difficult place to do business.
But come they still do. There are exactly 100 global long-only equities managers and products listed in the recently revamped Mercer Australia survey, for periods to March, before you start counting all the sub-categories and other international asset classes. These include global bonds and credit, infrastructure, REITs and other property, private equity, traditional indexed and smart beta, plus regional funds such as Asia ex-Japan and other emerging markets debt and equities.
There are more Aussie equities managers in the Mercer Australia survey than there are UK equities managers in the Mercer UK survey, even though the UK market is more than double the size of Australia’s. Thank heavens for the weather.
Plus, Australian managers are now more confident, thanks to the likes of Platinum Asset Management and the Magellan Financial Group, that they can attract flows for truly global product of their own.
The availability of Australian marketing entrepreneurs also provided an easier segway to the Australian and New Zealand market by pioneering, from the early 1990s, third-party marketing businesses which reduce the upfront costs associated with setting up an office.
Many of those businesses have evolved into multi-manager offerings of their own, by providing the RE services and owning the management rights to locally domiciled trusts and LICs. This has given the Australian marketers more certainty about their future, following several high-profile cases of the offshore firms ending their third-party contracts once a certain critical mass had been reached.
But in recent years both third-party marketing contracts and new foreign (US, UK and European mainly) subsidiary openings have slowed to a trickle. The main reason is that, despite the guaranteed market growth due to the SG, fees continue to be hammered by increasingly powerful fiduciaries as well as financial planners. And, to add to the foreigners’ concerns, the fastest growing segment of the market is the SMSF market, which is less inclined to use fund managers for their investment exposures than the wholesale and institutional markets and is very expensive to tackle.
With most investors aware of the importance of capacity in many strategies, why bother with Australia where you can get only 30-40bps, say, for a global mandate when you can get twice that or more from Europe or Asia?
Into this mix, Equity Trustees (EQT) has appointed a New York representative, Rob Harrison, an experienced Australian manager who most recently was the chief executive of investments for BNP Paribas for North America. He had previously run the firm’s Australian business.
Harrison said there were several roles in his remit:
- North American and European managers coming to Australia and therefore looking for an RE, administrator and trustee for their products
- To capitalise on the concept of a “fund of one”, whereby big fiduciaries may want to be the only client of a fund or trust – an example being REST’s $1 billion-odd in a Fischer Francis Trees and Watts absolute return fund (a BNP Paribas affiliate manager)
- Using his Australian contacts plus EQT’s database to service existing US managers looking to expand, where the decision-making process is often still in the US, and
- Finding new managers for EQT’s new UK investment admin business, Treasury Capital Fund Solutions, which it acquired earlier this year.
Harvey Kalman, EQT executive general manager, Corporate Trustee and Fund Services, said: “This is part of our global strategy to service fund managers no matter where they are in the world… “Our move to expand offshore and into the UK, with an office in London means we have the expertise and people on the ground to provide seamless service.”