Despite the loss of its most senior executive, Challenger Financial Services has increased the size of its institutional business team (snaring a Warakirri stalwart in the process), reflecting what it says is a shift in investor appetite towards guaranteed income and low-cost beta products.

The loss of James Bloom (see story above) has been offset by the arrival of two senior distribution executives, as well as the decision by Challenger’s general manager of distribution, Matthew Gaden, to rejoin the institutional fray while the new team beds down.

Six months after Patricia Newby left for Invesco, Challenger has found a new Melbourne-based BDM in Andrew Kateiva, who has joined after nine years with Warakirri Asset Management.

“I like to uncover a lot of stones when I’m looking for distribution staff, and Andrew’s someone who’s flown slightly under the radar. But if you drill down, he’s actually done business with a lot of his contacts, rather than just knowing them to say hello.”

Meawhile Challenger has joined the growing list of funds management firms benefiting from the return of expatriate financial services executives. Melanie Pyzik joined the Sydney office yesterday after six years abroad with  Macquarie Group, where she specialised in infrastructure and property product distribution, most recently in Dubai.

Gaden said Pyzik would spend a lot of time on Challenger’s ‘Solutions Group’, which is offering institutions ‘guaranteed beta’ products for zero up-front management fee. The products work by leveraging Challenger’s $6 billion life company balance sheet to, for instance, offer a return profile mimicking that of cash, or other asset classes such as inflation-liked bonds or global sovereign debt.

Challenger had been able to upsize its institutional distribution team precisely because of this downward shift in risk appetite, Gaden said. The other major leg of this is in guaranteed income products for the post-retirement market. Gaden said super funds would not wait for the outcome of the Henry Tax Review – which is considering how to reduce retirees’ reliance on the equity risk premium –  before offering an annuity style product to members, because the popular demand for such guaranteed income streams was already apparent.

Challenger has been an early mover in the annuity space, with its ‘unitised annuity’, the Guaranteed Income Fund, already on 12 platforms.

Currently offering annuity terms up to 30 years, Gaden said the group would “dust off” its lifetime annuity contract should the Henry Review recommend they be a compulsory part of retirees’ asset allocation.

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