Retail push takes off overseas
THE retailisation trend does not appear to be a local phenomenon generated by our market conditions, but rather is also evident in international markets.
In the UK, while wholesale institutions are moving into the retail domain, there is also movement back the other way.
StateStreet Global Advisors chief investment officer, Alan Brown, notes the decision by Barclays Global Investments (BGI) in the UK late last year to move out of the retail indexing business and link up with Legal and General, a large institutional provider of indexes.
“However while there is a flow in both directions, I do see that changing somewhat and I do believe we will see a reversal of this, ” Brown says.
He says while many businesses have gone through an expansionary phase and have been pushing new frontiers, the current challenging environment and need to control costs even further is now making many businesses focus on their core competencies.
In the US, it is the bundling of superannuation solutions in the defined contribution market that is blurring the boundaries between wholesale and retail.
While in the past US companies have their own separate defined contribution (accumulation) plan that is serviced by a number of different service providers, bundling effectively pools wholesale services together such as investment management and record keeping services while still giving plan sponsors choice.
“Bundling allows you to leverage all of a plan’s resource synergies,” says StateStreet’s CitiStreet Advisers president, Ray Martin.
He says the US market is a few years ahead of Australia in terms of the level of bundling taking place in the superannuation market. However with technology as the enabling factor, Martin says the Australian superannuation market will also be dominated by bundled service providers.
“Technology allows the delivery of more services efficiently. With technology, you can now see through bundling and see what it actually can do,” he says.
— Fiona Moore
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