According to a research report by Morningstar, the funds management industry is facing a number of headwinds.
The upcoming headwinds include weak investor confidence, pressure on fees from increased competition, low-cost investment alternatives, net fund outflows, staff retention and increased regulation around the world.
“We believe the firm, like its competitors, will likely have to tolerate lower profitability metrics to maintain and increase funds under management,” the report said.
Given such an environment, BTIM’s acquisition of J O Hambro Capital Management (JOHCM) in 2011 had been a “masterstroke” that would provide the fund manager with access to international markets and a boost to funds under management.
The acquisition has enabled BTIM to enter into existing and new markets in Europe, the US and Southern Europe to increase distribution and diversify its assets under management.
JOHCM holds offices in London, Singapore and the US and accounts for half of BTIM’s funds under management and three-quarters of group operating earnings, and this represented a point of differentiation from BTIM’s competitors, the report said.
“JOHCM provides geographic diversification, strong global investment capabilities and higher growth opportunities than the domestic market,” the report said.
It also pointed out that BTIM’s arrangement to use Westpac’s BT brand will expire in September this year.
“We expect BT Investment Management will likely move to the JOHCM brand, as this fits in with its aim of being a global funds manager.”
The report signalled that BTIM business did enjoy some “favourable tailwinds”, such as a strong performance record, solid wages growth and employment, an ageing population and mandatory superannuation.
In fact, the continual growth of Australia’s “investable asset pool” will eventually become “too small to meet the increasing flow of superannuation contributions”, making BTIM’s global equities capabilities an advantage as investors seek greater exposure in international equities.