Are retail managed funds dead as BT and Westpac seem to think?
It's a question that has been pondered a lot in recent weeks since Good Returns ran the story about BT/Westpac closing a bunch of managed funds with $185 million in them.
My thoughts on this are that: No, retail funds are not dead. As someone pointed out to me, people may be getting too hung up on the structural issues about whether a fund is retail, mezzanine or wholesale. The key point is that a customer can get access to a managed fund product.
Clearly many advisers use a mix of retail and "wholesale" funds.
One take on this is that many of the big managers are focussed on platform business and getting their funds onto the platform menus as they believe this is where the bulk of the funds flow comes from and that there are efficiencies in distribution.
I can assure you, from discussions with many managers looking to come into the market over the years, that their focus is on the platforms.
While that may be their focus they still need to promote these funds and build their brands.
But there are also many offerings which I would characterise as retail. The characteristics of these funds, in my view, is that they tend to be more niche products from boutique managers and often they are more spicy than the vanilla flavoured mainstream offerings. (Also they can be more complicated).
There appears to be a bunch of funds which fall into this category and are surviving - think Liontamer, Man Investments, Fisher Funds and Platinum.
The issue which is probably more important to discuss is where do managed funds fit in and what is their future? Clearly in recent years we have seen investors and advisers opt for other investments such as shares and debentures over managed funds.
However, I predict that at some stage the tide will turn and that managed funds will be in vogue.
After all they are mainstream investment products in other countries we like to compare ourselves to, and the investment success of the NZ Superannuation Fund shows that good outcomes can be achieved using funds.
The challenge is to get people interested in funds and make them more relevant and effective. It doesn't matter whether they are retail, mezzanine or wholesale.
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