Challenger International will make the funds of five US funds management giants available for the first time to retail investors through a master trust launched this week.
The Challenger Global Choice investment vehicle will provide access to 20 funds from the likes of Janus Capital, Oppenheimer Funds, American Century, GMO and J&W Seligman.
Challenger’s head of funds management Martin Ashe says the product is the first investment vehicle to properly address the issues raised by FIF legislation brought down by the government two years ago and Ralph reforms implemented over the past two years.
Ashe says Global Choice is the first true mirror fund in Australia because it replicates exactly the mutual funds available to US investors through a structure with a number of different classes of units.
“This structure has only been available since the Treasurer announced the Collective Investment Vehicle legislation earlier this year,” he says.
The funds for the master trust were selected after an extensive search for suitable managers. Challenger hired Morningstar Research to select a range of US mutual funds that had four or five star ratings that did not already have retail distribution in Australia. Morningstar supplied a list of 25 fund managers and the senior executive contacts.
Ashe and Challenger International managing director Bill Ireland flew off to the US in October 1999 to discuss the business proposition with the managers.
Ashe says he was looking for managers that wanted to distribute in the Australian market but did not want to go to the expense of setting up an office and obtaining a licence. At the same time, he needed managers that would fully commit support to the Australian market, “not come out for the launch and never be seen again”.
From the 25 managers, five were selected to supply four funds each. The funds will be offered on a non-exclusive basis by Challenger. Challenger is also in discussions with a number of master trust providers to include the funds on their menus via the Challenger vehicle.
The funds are mostly global in their spread but there are also some new funds for the Australian market such as a US small cap fund, US real estate fund and an emerging markets fund.
The 20 funds together have almost $114 billion under management, more than the total retail funds management market in Australia. They include the $US31 billion Janus Worldwide fund, the $US17 billion Oppenheimer Main Street Growth and Income fund and the $US13 billion Janus Mercury fund. By comparison, Australia’s largest non-cash fund, Colonial First State’s Equity Imputation fund has about $US1.7 billion under management.
