Investment banks have become major direct service providers to private client and retail investor portfolios, mostly through their structured products. Yet they are conspicuous by their absence from wholesale manager menus. MICHAEL BAILEY examines whether the banks’ transactional culture can become acceptable to conservative superannuation funds, and whether they might find their biggest role in a new post-retirement universe. Institutional funds management is a relationship business. It has to be. A business development manager can spend months and years in meetings and presentations laying the groundwork for a single mandate with a single super fund. It would be a lonely, soulless existence if they did not develop some kind of relationship with at least a few of the asset consultants, fund investment officers and trustee boards which stood in their way.

Even if it’s just memorising the names of children and spouses and answering when the phone rings, something has to be done to build trust, and be done over a significant period of time. A salesperson from the structured products division of an investment bank, on the other hand, probably doesn’t get to know what a particular private client adviser or dealer group researcher does with their weekend. Even if they wanted to, there’s not been much time for small talk in the way the structured products business has grown within the Australian retail market. The emphasis has been on releasing funds, lots of them, with the deadlines for entry getting shorter and more frenetic as the mums and dads, or at least those advising them, have continued to lap them up.

Protection for the people… A look at the list of latest reports available from Aegis Equities Research, a rater of structured products servicing the private broker and financial planner communities, is testament to the weight and diversity of structured product launches in recent times. As Irfan Khan, the head of equity structured products at Citigroup Global Capital Markets, puts it: “Our trading desk is not that far removed from the street any more.” On June 6, there appeared on the Aegis site a report recommending OM-IP Eclipse, a Man Group fund of hedge funds with a ‘rising’ capital guarantee from Commonwealth Bank, whose investment banking arm will lock in 50 per cent of new profits each financial year after making good any prior years’ losses. Its aggregate fees of 5.47 per cent per annum are accepted by Aegis as “comparable with similar products at the product level”. On June 1 it was the turn of the Macquarie Equinox Select Opportunities Trust, the ninth in the Millionaire Factory’s busy schedule of Equinox releases.

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