Sydney-headquartered First Sentier Investors will hand back around $14 billion to a dozen local institutional clients after shedding four investment capabilities in its Australian asset management team.
In a media release on Tuesday morning, the firm announced it will close its Australian-based global credit, Australian fixed income, equity income and emerging companies teams.
The global credit and Australian fixed income teams sat within its broader fixed income team; while the equity income and emerging companies teams sat within its broader Australian equities team. The only team retained within the fixed income branch was cash.
The move will result in around 30 job cuts and a 5.8 per cent decline in First Sentier’s $238 billion asset under management.
History would suggest that returning capital to investors usually requires some gymnastics in investment execution. When US passive investing giant Vanguard announced the launch of its own super fund in 2020, it reportedly had to return up to $100 billion in mandates. The transition process was estimated to take up to two years.
While First Sentier’s task is smaller in scale, a spokesperson confirmed to Investment Magazine that to ensure an orderly capital transition back to clients, the process will take a number of months. An undisclosed number of investment professionals in the affected teams will remain with First Sentier to manage the transition.
The firm declined to name any specific institutional clients impacted, but various funds’ external asset manager disclosures provide some hints.
The $272 billion Australian sovereign Future Fund currently lists First Sentier as one of its high-grade debt managers, and UniSuper lists the firm as one of its fixed interest asset managers.
Construction industry fund Cbus also lists First Sentier as the sole manager of its $594 million enhanced income asset class, which the super fund defined as “investments in Australian and global investment grade credit securities, such as corporate and securitised”.
First Sentier, previously Colonial First State Global Asset Management, was acquired by Japanese financial giant MUFG from the Commonwealth Bank in 2019.
Global head of investment management at First Sentier, David Allen, said the four asset class capabilities were closed because of client consolidation and investment internalisation, as well as ongoing margin pressure.
“We have looked across our business in Australia to ensure each of our investment capabilities has sufficient client demand to be commercially material and sustainable,” he said in a statement.
“While these teams have delivered strong client outcomes over a long period of time, they have been unable to achieve growth that meets our ambitions.”
First Sentier also manages other asset classes such as infrastructure for UniSuper, Australian Retirement Trust, AMP Super and Cbus, as well as Australian shares for Hostplus.
