The Australian custody and investment administration market will increasingly become one of global platforms and unbundled services. MICHAEL BAILEY reports. The days of selling funds managers the ‘securities services’ concept – which bundles investment administration and custody – could be numbered in Australia, according to the chief of a major domestic custodian. The business Andrew Bastow runs in Australia might be called HSBC Securities Services (HSBC SS), but unlike competitors with a similar moniker, HSBC SS offers domestic custody only in Australia, leaving it to others to run middleand front-office services. There is a good reason why HSBC SS has not entered the administration fray here – it is the Australian sub-custodian for a number of global custodians, most notably State Street, which is also in the investment administration and master custody businesses.
Hedge FoFs adapt to the new world
There has been a lot of speculation recently about whether the hedge funds of funds (hedge FoFs) business model will survive the wash-up of the financial crisis. But many FoFs are changing what they offer investors – not just better transparency and lower fees. GREG BRIGHT spoke to Richard Keary, chief executive of the Australian arm of international FoF manager FRM about the trends.
What drives Australia’s lower-return future
Australia’s powerful investment returns have been driven by the rising terms of trade throughout the commodities boom and generally low rate of inflation. But have the good times gone? Robert Hogg, senior consultant at Frontier Investment Consulting, assesses how major forces determining the performance of domestic asset classes will influence returns in the years to come.
Changing Tracks – the future of equity investing
Equity investments are the largest made by superannuation funds, and for good reasons. The equity risk premium, believed to be an ongoing phenomenon in listed markets, suits the needs of accumulation funds and – even better – active management promises to beat this embedded return. Or so we thought. Something has gone wrong in the last decade as markets boomed, crashed and in the end went nowhere. Does this mark the death of the great equity cult? SIMON MUMME and GREG BRIGHT report. Will Cooper and a dopey Government cost Australia?
The Government’s announcement before Christmas that it would accept the main Cooper Inquiry recommendations and move towards proposed legislation this year has set the scene for an intensification in lobbying by industry groups. The Government has promised further consultations in the process but these will be less formal than in the inquiry process. Meanwhile, funds managers are preparing themselves for an extended period where lower costs will be a key component of their adapting business models. Putting aside the continuing fee-for-service evolution in the retail advice market, the central plank of the costs issue for super funds and their managers is MySuper. MySuper will force all super funds to have a low-cost default option. Both ASFA and AIST have argued against this, but their arguments have primarily focused on the extra administrative burden for funds, and with little-or-no evidence that it would actually benefit members.
Perpetual debuts mortgage trust for instos
Perpetual has debuted what it claims is the country’s first mortgage trust for institutions, and has attracted $175 million to the senior-debt, first-registered mortgage fund with a target return rate of 4 per cent gross return. Despite the recent troubled history of mortgage trusts, Perpetual’s Richard Brandweiner was upbeat about this fund’s chances, and said the fund’s inflows came equally from the fixed-income and alternatives’ allocations of the investing funds. Perpetual had also launched its secured private debt fund No. 2 as a mezzanine-debt second-registered mortgage fund with a target return rate of 10 per cent which closes at the end of next month. In contrast to the older-style mortgage trusts – some of which had daily liquidity – Perpetual’s trusts would be closed-end with three- or four-year timeframes. “The closed-end nature of the fund means that investors commit to lock in their funds for the terms of the loans, meaning that there is no need for daily liquidity,” said Brandweiner, who is Perpetual’s group executive for income and multi-sector investments.
Super funds get up to monkey business
Superannuation fund members need a greater understanding of their basic finances in order to be lead more successful lives, according to Matt Linnert, co-founder of specialist financial education company Innergi. Linnert, who will be speaking this month at the FEAL Fund Executive Forum, believed the more engaged individuals became with their finances the less demand they placed upon governments for financial help – especially when it came to retirement. “One of the cornerstones for a person to be financially successful, at least in the Australian marketplace, is for them to make the most of the superannuation that they hold,” he said.
NGS Super makes foray into China A-Shares
For Tim Hughes, investment counsel at NGS Super, China’s rise is the most important change in the global economy since the industrial revolution – but the challenge for investors is working out how to profit from it. Investing directly in the Chinese A-Share market was one way to meet this challenge, Hughes said, which led NGS Super to appoint HSBC Asset Management and Bernstein Value Equities to invest an undisclosed sum of money in the market for the fund. NGS Super’s time horizon for investing in A-Shares was nothing less than three-to-five years, said Hughes, and the fund would have to accept the volatile nature of the market in the short-term and hope their managers can take advantage of it.
Long shadows loom over the recovery
The phrase ‘double-dip’ hasn’t been prevalent in the business media for at least a couple of months. But the threat of another global, synchronised downturn is still real. Australia’s booming commodities market and solid banks spared us from the worst of the financial crisis, but it was a different story overseas, where stimulus and bail-out packages within recession-hit economies have spawned a new threat.
