Events including the dotcom bubble, the credit-fuelled worldwide bull market and subsequent global financial crisis (GFC) have left many managers and investors with bittersweet experiences.
But despite the ups and downs of markets and numerous industry reviews, the fact the local industry has become an increasingly important part of “what makes Australia tick” has heartened Perpetual managing director and Investment and Financial Services Association chair David Deverall.
For Deverall, a key highlight in the past decade was when the Australian managed funds market surpassed $1 trillion under management for the first time.
“It was at that point when we went through $1 trillion all of a sudden we realised that this is an enormous industry with huge responsibilities,” he says.
“At the end of the day we are looking after the retirement savings of millions of Australians. And that is an enormously responsible role to have and for me to be in a leadership position both at Perpetual [and] at an industry body level is quite humbling really.”
He says he was also impressed at how the local market was able to absorb the massive amount of equity raisings “so beautifully” from corporate Australia amid the GFC.
“That again made us realise what an important industry ours is in the overall workings of the Australian financial system and more broadly across Australia [from a] total societal perspective,” he says.
The recent publication of the Johnson report into Australia as a global financial services centre is also a highlight to Deverall.
“You look at the facts and figures that come out of that [which] point to the pre-eminence of the Australian funds management industry as one of the world leaders,” he says.
“I think the very statistics we looked at [we] are the fourth largest funds management industry in the world, which, you know, for an economy with only 20 million people is mind-blowing.”
He also says the “incredible dynamism” and competitiveness of the industry and how the sector continues to evolve because of extreme competition is one of the high points of the past decade.
“If you look at funds management, there is 100 or so funds management companies – everybody from the boutiques through to the large players who are owned by the big four banks through to the players who are owned by the big overseas institutions through to large size independent players like Perpetual,” he says.
“I think that often gets overlooked in the debate about our industry, sometimes by very senior commentators that they make the assumption that our industry is similar to many other industries in financial services in that it’s an oligopoly.
“This is brutal, brutally open competition and that’s great for the freshness and dynamism in the industry.”
Despite the fierce competition posed by index funds, he says active fund managers like Perpetual will play a big role in the future.
“Our observation is that index funds have often taken good flows at the back end of difficult market conditions because people focus on cost,” he says.
“I think the good news on that is as people look at the data, they see that active funds, for example, active Australian equity funds, are much, much more effective in terms of delivering performance than index funds are.
“There is an enormous industry for active management in Australia. It will continue to thrive in the years ahead.”
