The success of Credit Suisse and UBS Asset Management in this year’s Money Management Assirt Fund Manager of the Year awards marks a significant turning point for the Australian financial services industry.
Not only is it the first time these two managers have been even nominated for a category award, but the two were either first or second in four of the six category awards.
The importance of their achievement is not so much the fact that their investment processes have been proven robust, which is commendable, but more the status of these players in the global financial services marketplace. Both fund managers are owned by European-based financial services institutions that are among the 10 biggest players in the financial services business around the world.
Both are relative newcomers to the Australian retail market. Under the tutelage of respected retail distribution executive Brian Thomas, Credit Suisse has aggressively won retail share since launching 18 months ago. Good performance numbers haven’t hurt but the strength of the distribution relationships have sealed the success.
UBS has also been making waves since launching into the retail market last year. They have been quieter than their Swiss compatriots in flexing distribution muscle but have made inroads in the master trust market and the mezzanine product market to build about $1.6 billion in retail funds under management.
Even two years ago, no-one would have guessed the Europeans would be making such a mark on the Australian landscape. All the predictions pointed towards an invasion by the Yankees, lead by the big name Merrill Lynch, Fidelity and Vanguard corporations and backed up by US giants Alliance, Putnam, Wellington and Janus among others.
Since then, the Americans have almost universally adopted a back seat approach to the Australian market, forming alliances with already established fund managers. The Fidelity/ Perpetual relationship is held out as a model for this kind of alliance. Similar deals have been signed by Rothschild and Macquarie while ANZ Funds Management is likely to announce a deal in the next few months.
The European-based managers have taken the opposite approach. Both the giant ING and AXA Corporations have stripped their local subsidiaries of their established Australian brands but maintained the all important distribution relationships.
The new European retail players Credit Suisse, UBS and Skandia have elected to develop their own distribution networks by scooping up some of the best business development talent from around the industry. They have all decided to put significant dollars behind branding and distribution rather than forming distribution alliances with local players. If they want local knowledge, they will simply buy the companies or the people.
It will be interesting to watch which strategy comes out on top in coming years. Many of the overseas based managers are plotting a strategy for a choice of superannuation fund regime where brand and distribution rule the roost. At the moment, the European-based managers have the runs on the board, but a year is a long time in funds management.
