The Australian Securities and Investments Commission’s (ASIC) Regulatory Guide 97 (RG 97), aimed at increasing levels of disclosure of fees and costs to investors, will have long-term implications for investment strategy and performance for the Australian multi-asset fund industry, according to Zenith’s study.
“Zenith’s 2017 Multi-Asset (Diversified) Sector Review” found an increasing trend among multi-managers to restructure their portfolios to accommodate lower-cost strategies, which were typically passive and smart beta strategies.
However, according to Zenith’s study, the lowest cost investments would also limit the potential for outperformance over the longer term.
The report also found that multi-managers were reducing their cost base via “multi-sleeving”, a mechanism to reallocate to low-cost strategies, fee apportionment and reduction of the number of underlying fund managers.
Zenith’s head of multi-asset and income research, Andrew Yap, said: “While we believe the cost-sensitive measures have merit for fund managers in an RG97 world, we also note that funds may lose some ground on efficiency, reflecting fewer avenues to generate performance or diversify risk.
“This has the potential to limit the ability of funds to outperform their benchmarks in the future and is an area we will continue to monitor closely.”
