Decision on CFS future imminent
The fate of investment manufacturing at Colonial First State (CFS) will be announced before the end of February, but dealer groups and researchers have called for process changes in the business rather than a separation from the broader CFS group.
A spin-off of the investment division from CFS’ distribution and platform arms has been the focus of market speculation for several weeks, and is one of the potential outcomes of a review now being conducted by head of investment and insurance services, Stuart Grimshaw.
Money Management has confirmed that a decision on the investment division’s future will be made by the end of this month.
Lonsec senior analyst Grant Kennaway said Macquarie Bank also attempted such a spin-off but recently reversed it.
“They found they had too many manufacturing teams competing for the time of the centralised distribution team and it just put the distribution people further away from the products,” he said.
According to InvestorWeb senior analyst Rodney Sebire, the problem that should be dealt with in the review was not CFS’ overall structure but its processes for asset allocation and global equities management.
“Joe Fernandes’ [asset allocation] team really needs to justify why it had the balanced growth fund at 29 per cent global equities over the past 12 months,” Sebire said.
While he said the recent removal of some errant stockpickers from CFS’ global team was a positive sign, Kennaway agreed that international equities had been the “real problem” in CFS’ poor performing balanced fund.
“I would have preferred to see a full review of global equities, and rather than splitting half of it into indexed management they could have appointed a different active manager.”
Professional Investor Services technical manager Mark Teale said patience with CFS would be rewarded as it had been with BT during its Australian equity performance nightmare of 2000.
“Everyone’s been getting out of Colonial like they got out of BT, but unless you’re very close to retirement, we think you should ride it out.”
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