Challenger FUM stablises following real estate sale

challenger Challenger life nick Hamilton

19 October 2023
| By Staff |
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Challenger has declared a “positive performance despite challenging industry conditions” for its
funds management business for the quarter.

In a quarterly update for the first three months of FY24, the firm said funds under management (FUM) remained stable at $98.4 billion, but this figure reflects the $3.3 billion of FUM that has been derecognised following the sale of its real estate business CRE to Elanor Investors Group. 

Challenger said that excluding the sale of CRE, FUM increased by 3 per cent, or $3.2 billion, for the quarter.

Challenger completed the deal in July for $38 million in newly issued securities in Elanor – upon completion,

Challenger’s holding was approximately 17 per cent of total Elanor securities. 

The two have also established a strategic partnership, whereby Challenger’s multi-affiliate business, Fidante, distributes Elanor’s existing and new funds, and Elanor is Challenger’s commercial real estate partner in Australia and New Zealand.

Meanwhile, Fidante’s FUM was $81.7 billion, an increase of $3.6 billion or 5 per cent for the quarter. This growth was driven by net inflows of $4.3 billion for the quarter, but partially offset by negative investment markets of $0.4 billion and client distributions of $0.3 billion. 

Challenger Investment Management (CIM) FUM was $16.7 billion and decreased by $3.7 billion, or 18 per cent for the quarter, primarily driven by the CRE sale.

Challenger said that in September 2023, Fidante commenced distributing the Apollo Aligned Alternatives (AAA) strategy to the Australian market. Challenger said this positioned AAA as an equity replacement product, which will provide clients with access to a diversified portfolio of private market opportunities, investing side-by-side with more than US$10 billion of Apollo’s own balance sheet capital.

Nick Hamilton, Challenger’s managing director and CEO, said the funds management business would “continue to focus on adding new alternative investment strategies to meet growing client demand”.

“With the structural tailwinds to the Australian retirement market, we have an exciting year ahead as we leverage our expertise to meet the growing need for guaranteed income and active investment management,” he added.

Meanwhile, Challenger said there is significant demand for Challenger Life’s services to support superannuation funds to help meet their members’ needs in retirement. This is reflected by the deal Challenger has struck with Aware Super back in July to provide a de-risking solution for its defined benefit fund, which includes $619 million group lifetime annuity.

Challenger Life’s quarterly sales increased 2 per cent to $2.8 billion, driven by what the company said to be record sales for its quarterly annuities – although this was partially offset by lower Challenger Index Plus sales.

With 91 per cent of new business annuity sales being lifetime or a term of two years or more, Challenger said it continues to grow the longer duration business.

Challenger also reaffirmed its full year 2024 normalised net profit before tax guidance range of between $555 million and $605 million.

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