Asset managers missing out on rivals’ performance
There have been some significant success stories for asset managers but research has found firms are missing out by being reluctant to invest in their rivals with most holdings belonging to exchange traded funds (ETFs).
Over the last five years to 21 July, 2021, shares in the Pinnacle Investment Management had risen by 854%. The multi-affiliate investment management firm owned asset managers such as Antipodes, Coolabah Capital, Plato Investment Management and Hyperion Asset Management.
But according to FE Analytics, Pinnacle was held in the top 10 of just three funds; Aberdeen Standard Australian Small Companies, SGH Ice and VanEck Vectors Small Companies Masters ETF.
Another popular asset management group was Magellan Financial Group which had seen shares rise by 191% over the same period compared to gains of 61% by the ASX 200. Only two ETFs held the firm in its top 10; BlackRock iShares S&P/ASX Dividend Opportunities ETF and VanEck Vectors S&P/ASX MidCap ETF.
Pendal was only held by three funds, Janus Henderson and Platinum were held by two and Perpetual and Challenger were held by one, several of which were ETFs.
In its most recent factsheet, Callum Burns, portfolio manager of the SGH Ice fund said: “The scale of the Pinnacle franchise, together with the depth and breadth of investment strategies across various asset classes under its banner was clear from progress made across the last 12 months.
“FUM inflows across the stable of investment managers have markedly increased, with total FUM likely to finish the financial year materially higher. The outlook for performance fees has also benefited, critically now spread across a broader group of investment strategies. We would highlight Pinnacle’s distribution capability offshore as a key asset and note the continued, prudent buildout in this key resource.”
Steve Johnson, chief investment officer at Forager, said asset managers were often reluctant to invest in rival firms and that he wished he had invested in the two firms earlier. Other hurdles included having too much knowledge of the industry rather than focusing on whether it was a good company and viewing the firms as a secondary derivative of the market.
“It has been a hurdle for me and it has been a mistake not to own Pinnacle and Magellan. They are amazingly successful businesses so it surprises me that other asset managers don’t own them. It is an irrational view as it is our job to invest in the best companies for our clients.
“Magellan shares were only $2 in 2008 and now they are over $50, at the time I wondered whether they would be able to attract more assets but that was no excuse as now they have over $100 billion.”
AUTHOR
Laura Dew
Recommended for you
T. Rowe Price believes Australian growth is successfully managing to shrug off consumer weakness, but the firm’s multi-asset team is not yet positive enough to increase its underweight position.
Iress has issued an update denying the validity of “certain statements” made by an alleged threat actor, following a cyber incident last weekend.
The latest budget papers have outlined a $10 million provision for ASIC greenwashing enforcement activity as well as funds for a sustainable labelling regime to be partially met by industry levies.
Betashares has expanded its fixed income solutions with the launch of a new ETF offering exposure to subordinated bonds issued by the big four Australian banks.
