Compulsory superannuation contributions should be raised to 15 per cent and there will be fewer fund managers working in the industry, says Greg Cooper, chief executive of Schroder Investment Management Australia Ltd.
Cooper says 150 Australian stock fund managers are “too many”.
“As the number of super funds fall and the size of their assets increases they will employ fewer fund managers,” says Cooper.
Cooper’s comments come amid anaemic retail fund flows.
“Retail flows are poor,” says Cooper. “High term deposit rates and a trend toward self-managed funds have tended to allocate money away from managed funds.”
Cooper says the superannuation contribution rate should be raised to at least 15 per cent from the current nine per cent.
“Will 12 per cent deliver an adequate retirement for most Australians?” asks Cooper. “No way. It needs to be higher, 15 per cent or more.”
In a wide ranging conversation over morning tea, Cooper says superannuation funds could be a potential funding source for Australian listed companies.
“Super funds can play a dis-intermediation role to the banks by providing debt capital to companies,” says Cooper.
Schroder this year celebrated its 50th anniversary in Australia. But Cooper has no immediate hiring plans.
“We’re not expecting to expand,” says Cooper. “There is a medium- to long-term opportunity to broaden cash flow by playing in the Australian debt market against a backdrop of trying to achieve CPI-plus returns that are stable.”
Cooper says the company has won a number of institutional mandates this year. He declined to disclose the names of the superannuation funds or the amount of money given to Schroder.
Schroder employs five institutional sales staff and about five retail sales staff.
Schroder has $5 billion in Australian fixed income funds, $10 billion in local equities, $10 billion in global equities and $1 billion in other assets.
“Short-term performance reports encourages wrong behaviour,” says Cooper. “It is about delivering long-term performance to clients.”
He doesn’t envisage a bull market.
“As the world struggles with high debt levels it will de-leverage and the result will be sub-par growth,” says Cooper. “A bull market is not sustainable.”
Schroder employs 75 people in Sydney including 15 concerned with stock investing, 11 in fixed income investing and six that invest in global equity markets. Its Australian equity fund has been in operation since 1963.
The entry of Chi-X Australia Ltd. to compete with ASX Ltd. may not bolster liquidity or transparency, he says.
“Better turnover does not equal better liquidity,” says Cooper. “There is a lot of liquidity out there but some are not putting capital at risk. People that are trying to extract a return from pure trading is not necessarily a good thing for long-term investors of capital.”
Chi-X is expected to begin offering a lit liquidity pool from October, the first alternative to the ASX which traces its origins to 1861.
“More exchanges are not necessarily a better outcome,” says Cooper. “Markets globally have seen the rise of high frequency trading but that is not necessarily good for our clients.”