The funds management sector is facing lower margins and more competition for mandates as super funds “exercise their positional power” and manage money in-house, says IFM Investors.
Speaking at a Bloomberg event in Sydney, IFM Investors chief executive Brett Himbury took aim at “misaligned, high cost, underperforming” fund managers.
In the current environment of relatively benign interest rates, asset owners are focused on their investment management fees down and returns up, Mr Himbury said.
"One of the solutions they've got is to insource [funds management]," he said. "And frankly they should if they can't find aligned, skilled, value-for-money managers – it's their money."
Fund managers don't deserve to manage institutional money unless they can demonstrate an ability to "consistently add value and do so at a reasonable cost and at genuine alignment".
"Look at [the consolidation within Australian superannuation] – they will [insource] and they are exercising their positional power – and they should," Mr Himbury said.
"So in that environment if you're a skilled good value-for-money aligned manager that actually does genuinely represent the members' interest you've got a[n] enormous upside as a manager," he said.
He acknowledged that "every fund manager in the room" would probably argue they are well-aligned with their institutional clients.
"But if you're not, you're in a world of pain. Because margins will come down, there will be less money going to less managers at less margin. And so there should be," Mr Himbury said.
"There will also be more managers going to less [asset owners] probably at less margin," he said.
As far as IFM Investors is concerned, it is more of a "glass half full than half empty environment", Mr Himbury said.
"But if you're misaligned, high cost and underperforming – goodnight Irene," he said.
Wealth management relationships are under threat as clients look to switch providers driven by the impact of the royal commission. ...
S&P Dow Jones has announced a new addition to its global ESG index using enhanced ESG scores and granular data. ...
Investor confidence is on the rebound and the ASX hit a 12-year high on Monday. But it’s not all good news for the Australian economy. ...