Australian asset managers will continue to be attracted to the SMSF industry, but in order to compete successfully, they must ensure they can meet the market’s desire for low-cost tailored offerings, according to State Street.
The SMSF market was looking for relatively low-cost, efficient, multi-diversified asset types to complement existing portfolios, State Street Asia-Pacific head of asset manager sector solutions Paul Khoury said.
“As long as managers target that lower-cost solution, they think they can do it better than going through either a larger fund or an asset manager directly,” Khoury told selfmanagedsuper.
“The challenge is whether the asset manager has the scale, distribution and product scope to meet the SMSFs’ requirements.
“There’s no question it’s attractive to all asset managers.”
In addition, managers that supported products that were listed through a securities exchange and provided a low-cost stream of activity were more likely to appeal to SMSFs in the longer term, within the current relatively low-yield, low-return environment.
“The other aspect is that what investors are starting to identify, particularly in SMSFs, is that even achieving a benchmark return is challenging, so the idea of investing into a passive or exchange-traded fund-type product is much more appealing,” Khoury said.
“It’s fair to say that the SMSF market continues to grow and asset managers will, either directly or through the existing superannuation schemes that are out there, continue to be able to access those investment funds.
“Also, there are a lot of new things that are happening where large super funds, in the hope of retaining some of those members who may have a portion of their funds in an SMSF, are providing them access to direct investment anyway, and that direct investment is typically being channelled into those large asset manager houses.”
He said Australian asset managers would broadly continue to do well in the SMSF market, but not all managers would.
Last month, State Street published its “Frontline revolution: The new battleground for asset managers” report, which identified the current themes in the global asset management industry.
It surveyed 300 senior executives at asset management firms that managed at least US$5 billion in retail and/or institutional client assets.
Respondents were equally distributed across the Asia-Pacific region, North America and Europe.
There were 30 Australian respondents, accounting for just under one-third of the Asia-Pacific managers surveyed.