The Australian market has too many domestic and international fund managers and is heading for a major “structural shift”, according to chief executive of Bennelong Funds Management, Jarrod Brown.
In an interview with I&T News, Brown said that while his boutique – which manages around $3 billion for a range of Australian institutions – had experienced a “good run, without pumping up our own tyres,” the overall funds industry was overcrowded and not all managers would stay in the market.
“I feel we are at full competition in Australia as an asset management community,” said Brown.
“There are probably 400 locally domiciled investment managers and another 400 who try and participate. It’s a ridiculous situation and they can’t all survive. Everyone is after the superannuation dollar, but I don’t think we can continue to incubate our own boutiques and also support so many fly-in-fly-out global managers.”
Brown said Bennelong, which was recently appointed to run part of MLC’s $1.2 billion Australian equities fund, had managed to be one of the few managers in the market with inflows.
He attributed the firm’s recent success, which culminated in winning Australian equities fund manager of the year award at the recent Zenith awards, not only to performance but also to relationships.
“If you get to the final phase and you are competing for a mandate, and you are up against one other firm and you have both ticked the boxes, then if you have the stronger relationship I think you will win that business,” says Brown.
“That is just human nature and it won’t change in any industry.”
He attributed the influx of foreign managers to structural changes in the US markets, with funds management houses moving out of their classic long-US-equity strategy and looking to diversity.
“Australia is an easy market for them to consider, but for every start-up you are going to find another failure,” Brown said.