Adeclinein total assets under management in Australia, as well as continuing weak fund inflows, is creating a situationAssirtbelieves could have “severe consequences” for the funds management industry.
Figures released last week by the research house show that sharp falls in global equity markets in 2002 have resulted in the total assets of the Australian industry shrinking seven per cent for the full calendar year, down from $689.7 billion to $640.8 billion.
Assirt says the global situation and weak flows are severely denting the profitability of fund management businesses in Australia, estimating that around $250 million has been wiped from the annual revenue of fund managers.
“If industry flows continue to be weak, the impact will be directly on the bottom line, on the profitability of funds management businesses,” Assirt head of investment solutions Steven Gamerov says.
The research house has also expressed concern with the continued flight of investors from aggressive to defensive asset classes, as a result of lingering market uncertainty.
The Assirt results for the 2002 December quarter show that investors have significantly curtailed investments into Australian and overseas equity funds in preference for the more defensive cash and Australian fixed interest sectors.
“Investors are becoming guilty of performance chasing, of investing at the wrong time in the cycle, with the impact for them going forward being poor returns,” Gamerov says.
According to the Assirt figures, significant net inflows of $1.1 billion were recorded into the Australian fixed interest sector in the December quarter, representing one of the largest inflows into this sector ever reported.
