The asset managers winning the active wars

Two Australian fund managers have been singled out by Morningstar for their ability to achieve consistent performance despite most managers witnessing underperformance of the ASX 200.

In its Australian Asset Manager report for Q3 2025, the research house surveyed seven active asset managers in Challenger, GQG, Insignia, Magellan, Perpetual, Pinnacle, and Platinum.

In total return terms, the firm said most asset managers had underperformed the ASX 200 since the start of 2025, but name-checked Insignia and Challenger as two which are beating the pack.

“Challenger and Insignia are the more consistent outperformers. The former likely benefits from investor optimism on the potential for improved product sales and operating margins, while the latter is priced for an anticipated acquisition by an external suitor,” it said.

It was announced in July that Insignia would be acquired by US private equity giant CC Capital, having previously received bids from Bain Capital and Brookfield Asset Management. 

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Meanwhile, Challenger has made a concentrated effort on the development of retirement income and lifetime income products. In a sign of synergies between the success of two firms, MLC – which is part of Insignia – entered into a tripartite relationship with Challenger and insurer TAL on a retirement solution and a series of retirement income offerings in July.

Both firms have also exhibited strong share price growth despite asset managers typically exhibiting volatility due to their close link with market movements. Shares in Insignia are up 46 per cent over the past 12 months to 22 October, helped by a rally after the firm received its private equity bids at the end of 2024, while Challenger is up 48 per cent.

This compares to losses at firms such as GQG Partners, which lost 41 per cent over the same period, and Platinum (now known as L1 Group following a merger with L1 Capital), which is down 13 per cent.

“For Insignia, share price drivers – aside from the prospects of being acquired – are likely to be slower fee compression, more stable medium-term flows and the opportunity to reduce duplicated costs and extract scale efficiencies,” it said.

“We believe the market underestimated Insignia’s earnings growth potential with cost-out counterbalancing flatlining revenue. There is still ample room to remove duplicate or non-essential costs to extract scale efficiencies. Moreover, we expect revenues to stabilise over the long term rather than decline.”

Share price growth of fund managers over one year

Source: ASX, 22 October

Looking forward onto the future outlook for active asset managers, Morningstar repeated a persistent theme persists, where active managers are likely to continue to see outflows in favour of passive and ETF products.

It praised active managers for taking deliberate steps to tackle this problem with the launch of their own active ETFs and dual-access fund structure, but admitted passive is still gathering the bulk of inflows. Others have changed their fee structures to compete with low-cost players or focused attention on high-fee specialist products.

“Traditional active managers are likely to continue losing market share to passive investments such as ETF, which offer lower fees and efficient access while replicating simpler active strategies. Among active managers, firms focused on conventional equity and fixed income products remain at risk, given their replicability by passive vehicles. Conversely, firms specialising in less commoditised segments such as private credit and specialised fixed income strategies are relatively better well positioned to grow,” it said.

“Some firms like Pinnacle have managed to withstand fee pressure by shifting their focus to high margin asset classes. Others, such as L1 Group and Magellan, have higher blended group margins given their relatively lower proportions of low-margin institutional mandates. 

“However, we believe the broader trend on fees is downward as competition from passive funds continues to exert fee pressure, capping earnings growth.”