With the Australian Securities Exchange (ASX) considering the final look of its new listed managed fund service, questions remain over whether Aqua II will attract wholesale fund managers to make the leap into the retail realm.
If supported, the service could spell the end of the expensive and complicated paper-based settlement process, which OneVue chief executive Connie McKeage said could potentially make it worthwhile for wholesale managers to target retail investors.
"Part of the reason they haven't bothered with retail is that they would have to invest a lot of resources in increasing their profile. Another key part to that is the need for greater distribution," she said.
Through the automated settlement service, fund managers will have access to those distribution channels – traditionally a point against trying to market to retail investors, McKeage added.
"It might be worth it for the first time for people who are good performers in the market to consider being in the retail market, because all of a sudden it's less expensive to go in, other people can look after the infrastructure and there's distribution," she said.
Recently involved in industry talks with the ASX, Aurora Funds Management director of institutional distribution Alistair Davidson said the new system would work best as another opportunity for the business to distribute its investment products.
Although brokers are all for having the opportunity to sell more products, he said fund managers will still need to market their managed funds to brokers' clients.
"The ASX have got a good settlement system and if it makes it easier for people to buy things, sure, but you still have to persuade them to buy them," Davidson said.
From a self-managed super fund perspective, Investment Trends senior analyst Recep Peker said he suspects Aqua II would not necessarily encourage retail investors – particularly SMSF investors – from investing in a managed fund.
He said they are "anti-managed fund" because they want to avoid paying high fees and want greater control over their assets, regardless of whether investing is made more direct or not.
Wealth Insights chief executive Vanessa McMahon said the real winners from Aqua II would be smaller, boutique fund managers who don't use a platform to distribute their products.
"With most fund flows coming from platforms, boutiques are beholden to platforms at the moment," she said.
"To be able to have another distribution channel is surely only going to help," McMahon said.
According to Ian Irvine, head of customer and business development at the ASX, there is some consideration from managers that they will be put in touch with previously unseen self-directed investors.
"Now fund managers have to weigh up in their mind the efficiencies that an automated message service may provide – it may deliver them cost savings, but they are dealing with more customers," he said.
