Speaking at the launch of the 2014 Financial Services Council/UBS State of the Industry report in Sydney, UBS GAM head of Australasia Bryce Doherty described the phenomenon of industry funds insourcing funds management as an "interesting evolution".
"Those large APRA funds going back ten years had a lot of their members sitting back in the balanced option or the growth option and therefore they had 30 per cent or 40 per cent sitting in Aussie shares," Mr Doherty said.
"If you think about them moving to being $100 billion, they’re going to have $40 billion in Aussie shares."
That would make an industry fund like AustralianSuper a larger manager of Australian equities than UBS GAM, Mr Doherty said.
"[AustralianSuper chief investment officer] Mark Delaney’s been upfront in saying they’re not going to inhouse the entire thing, but there are places where they can see it makes sense," he said.
As a result, UBS GAM is focusing on its global real estate, global infrastructure and advisory multi-asset businesses in its talks with industry funds, Mr Doherty said, but added that overall, the superannuation industry is growing "too fast" for the phenomenon of insourcing to put much of a "dent" in UBS's business.
FSC chief executive John Brogden said superannuation funds should not be insourcing based on cost alone.
"If you’re inhousing your funds, the question is about risk – and that’s APRA’s concern," Mr Brogden said.
"It’s one thing to sack XYZ fund manager if they get it wrong; it's much harder to sack your own team and admit you got it wrong internally," he said.
"It’s about managing your risk. You’d be worried if a fund the size of AustralianSuper managed everything – at that point there’s no way it could be cheaper," Mr Brogden said.
