Australia: Brutal competition for asset management
If there’s one area where Australia punches above its weight, it’s asset management. What is a country of 20 million people doing with the fourth-largest investment management market in the world, which topped A$1 trillion ($832 billion) this year?
"If you look at some of the asset pools or super funds in Australia their allocations to alternatives have been quite high, 20% or more"
It’s chiefly to do with the so-called superannuation guarantee introduced in 1992. Today, this requires employers to put a sum equivalent to 9% of every employee’s salary into superannuation, which is what Australians call their pension funds. The compounding effect, buoyed up by one of the world’s highest levels of share ownership and a stampede into domestic equity products after a three-year bull run on the Australian stock market, has pushed the size of the market to these improbable levels.
Many international banks report that asset management constitutes a disproportionate slice of revenues in Australia compared with elsewhere in the world. But at the same time it is a brutally competitive market and quite unlike any other: mastertrust or wrap aggregators completely dominate flows to retail investors, meaning that owners of these investment platforms (there are about 70, probably 10 of which are profitable) have completely removed mainstream fund managers from the distribution picture.