John Hamer, the Australian head of Nicholas Applegate, the San Diego-based equities and bond manager, got the phone call about 30 minutes before he was to have an important meeting with his largest client, AMP. Both his sales office in Sydney and the client service office in Melbourne were to be closed with just a few days notice.
Hamer went through with the meeting and presented the company line: the product was a good one and was unaffected by the withdrawal of the Australian presence. The manager would send people over from California regularly to keep clients informed. It shouldn’t matter that he, who had been head of the business for the past year, nor Melanie Douglas, the long-serving client service manager, were to be made redundant. Should it?
This is an interesting question which international managers who want to tap into the fourth-largest institutional market in the world – Australia – need to consider carefully. Can they realistically service the market from the US, UK or even a Singapore or Hong Kong office? Do Australian super funds need to have someone to talk to in their own country or own time zone?These questions are not new and their answers have not been clear previously. But given the financial crisis and the changes in funds management which have followed, the questions have taken on a new importance. Funds managers’ businesses are hurting. How much, if anything, do they need to spend on sales and client service to stay in the market?
There are probably a couple of dozen super funds which invest through offshore funds managers which have no presence in Australia, be that direct employees or third-party representation.
Would they rather those managers had someone locally they could talk to in their own time, even though that person probably had no detailed investment knowledge of their mandate? Probably yes. But would they be prepared to pay a bit more in fees to have that service? Maybe. Maybe not. Probably not much.Perhaps whether or not Nicholas Applegate retains its Australian clients, including a mooted $200 million from AMP, following last month’s Australian office closures will represent a good case study for other managers to consider. However, it will only be a survey of one.