Managed fund sector in recovery
After the challenging period immediately following the global financial crisis, a cyclical recovery seems to be taking place across the funds management space — but ongoing structural headwinds mean product innovation is still a key driver in performance.
That's according to Tria Investment Partners, which recently sourced data from a number of wrap account providers largely representative of clients in that segment of the retail market where fund and direct asset investing decisions can be made within the platform.
Observing the change in rolling annual net inflows to Australian equity and global equity funds over 2010-13, Tria found that between December 2010 and March 2013 Australian equity fund net inflows had almost doubled from an index value of 120 to 240.
For global equity fund inflows, the index value had more than tripled from 60 to 220 as at March.
Although the data reveals some light at the end of the tunnel for managed funds, particularly in an environment where money is starting to flow out of safe havens like term deposits, Tria managing partner Andrew Baker said the market is still far from a bullish return.
He said this is largely due to continuing structural changes, including technology, that is allowing managed funds to be substituted by investment vehicles such as direct portfolios and exchange traded funds.
Baker added that cost pressures and the Future of Financial Advice regulation are encouraging investors and advisers to replace funds with lower cost alternatives.
While strong and sustained investment performance can never be guaranteed, Baker said the findings of the research should be a reminder to active fund managers to stay innovative, including by positioning funds around asset classes that are often difficult for investors to do themselves (international assets and fixed interest outside of deposits).
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