Funds management salespeople say it’s been “hard” to win investment mandates from superannuation funds. “Money isn’t moving,” one told me in January. But least he, unlike other salespeople, still has a job.
Some managers are more optimistic because they are undergoing due diligence with investors. But they don’t allow their hopes to grow wild in case funds cancel or delay contracts. “That fat lady can do anything,” a domestic salesman of a global funds manager said to me in 2011 during advanced due diligence, illustrating the precariousness of the negotiations. When the mandate was finally signed,he joked that it would quieten headoffice for one month. Maybe two. It was clear that his bosses aimed to strike many deals in Australia.
They’re not alone. Lawrence E. Penn III, managing director of The Camelot Group, a New York-based private equity secondaries manager, neatly summarised the appeal of the this market last September: “Nine per cent is quite a number,” he said.
On January 24, the International Monetary Fund cut its estimate forworld economic growth this year from 4 per cent to 3.3 per cent, and lower edits estimate for 2013. In this scenario, compulsory super contributions, poised to rise from 9-12 per cent of workers’ pay in coming years, combined with the familiarity of our Anglo-Saxon political and legal systems, are reasons why Australia is seen as a “growth market” by investment services companies from the US, UK, Europe and, recently, Indonesia*.
Funds managers keen for more sales should talk to custodians. In a continuing run of tenders, dominant custodians are beingchallenged and sometimes beaten by invigorated rivals. Super funds are seeking the best deals. So they should. Funds enjoy mandated growth but compete on investment performance, member services and fees. Knowing this, custodians tailor sales pitches to address funds’ needs. To succeed, service providers should not see Australia only as a market with a steadymoney flow but focus on how they can help funds beat their peers.
*DISCLOSURE: With Austrade, Conexus Financial, publisher of Investment Magazine, describes the Australian investment industry to funds managers offshore in an annual conference series called “Opportunity Australia”.