Coming off a year in which it won some of the biggest local-equities mandates, including getting an extra $500 million from AustralianSuper, Fidelity Worldwide Investment is seeing opportunities to expand its business with increased institutional interest in its global and Asian equity strategies.
Fidelity’s Australian head of institutional business, Gary Bailey says its position as a research-driven investment house remains the key to its investment results.
In what has persistently remained a challenging environment for asset managers, Fidelity has continued to expand its offerings, including adding fixed income and direct real estate products.
Consolidation acceleration
While Fidelity and competitors such as Perpetual, which recently launched a core-equities campaign, are stepping up their offerings, Bailey predicts that recent consolidation in the industry will continue.
“We have had a lot of consolidation of funds in the market already and my impression is that we will see a new acceleration of that consolidation,” he says.
“This consolidation means a much larger volume of funds channelled through a much smaller number of vehicles.”
In a low-growth world
While 2011 saw emerging-market equities sell off on the back of concern over risk assets, Fidelity’s Asia fund portfolio manager David Urquhart separately said investors are looking closely at compelling valuations for Asian equities, with many markets trading at or near historic lows.
Bailey notes that as investors also search for yield they are focusing on equity strategies that hone in on quality stocks with good income streams.
“In a low-growth world, the prospects for high capital growth are limited so income becomes that much more important, so we are definitely seeing more interest and more awareness of that,” he says.
In July it was reported that Fidelity won $500 million of AustralianSuper’s Australian-equities business from Orion Asset Management. While Bailey would not comment specifically on a client, Fidelity is believed to now manage more than $1.5 billion of AustralianSuper’s local-equities portfolio.
Funds have more firepower
Large funds such as AustralianSuper now bring a lot of more internal investment firepower to discussions, now drawing on both the expertise of expanded internal investment teams and asset consultants.
“By the time superannuation funds come to us as part of a new mandate search they already have a very specific idea of what they are looking for. It doesn’t change what we do. Our approach is very research driven. We do our own fundamental research, we develop our own portfolio managers, and we have a range of different portfolio-manager styles and they evolve from the process,” he says.
Bailey says the industry will only know the effect the growth of in-sourcing has on the funds-management industry after the changes had washed through in the next five years.
“We continue to do what we do and maintain good connections in a non-intrusive way with the large funds and asset consultants,” he says.
