ASIC concerned about investment funds consolidation

The Australian Securities and Investments Commission (ASIC) has signaled its concern about investment fund consolidation and the consequences for emerging companies seeking equity capital.

ASIC chairman, James Shipton, raised the issue at the Asia Securities Industry & Financial Markets Association (ASIFMA) Annual Conference in Japan yesterday (10 October) where he said the regulator was observing many structural and environmental changes that had the potential to impact on the size and efficiency of Australia’s capital markets.

“Broadly, these changes can be categorised into the following themes:

  • investor consolidation,
  • growth in passive investments and ETFs, and
  • technological changes,” he said.
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Shipton said investment funds were consolidating into a smaller number of larger players and that this was being accompanied by a move by many of these larger funds to internalise a portion of their research and investment management functions.

“While this has the potential to reduce costs and give funds greater control, we are aware of the potential impacts this may have on capital markets, particularly, the ability of emerging companies to access equity capital,” he said. “As these larger funds seek a broader range of investment opportunities, we are observing growth in private debt and equity markets.”

Shipton said this was contributing to a global trend of de-equitisation of equity markets and a contraction in the number of companies listed on public markets.

“This is fast moving in a direction where regulators will need to consider the impact on public markets in the next five or 10 years and their ability to price and allocate risk capital,” he said.

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Mr Shipton, these changes and concentrations are a direct result of your policies? What else did you expect. If you 'punish' advisers for higher fee funds that may in the short term exhibit higher volatility and underperformance, but over time excellent performance, advisers are left with no choice but to use passive! You have also entrenched low fees at all costs mentality in the consumer. You created the playing field.

Seriously, now concerned about consolidation? It seems to me that all policies out of ASIC have been all about consolidation and with support from the PC report (ten of the best Funds) the only logical conclusion is the Industry will consolidate. AMP is in the process of doing just that - consolidate product offerings from 70 plus to I believe they said 5. Massive movement of FUM to Industry Super with no investigation as to how exactly all those clients moved and no personal advice was ever given. Now ASIC is concerned? Perhaps a good look at the Industry Funds unlisted assets would be a good idea but I suspect ASIC would not know the problems if they fell over them. Probably more in the best interest of ASIC to let the problem continue for some time - when it all fails, ASIC can ask for more funding to fix the problem?

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