Can banks make good fund managers?

John Body said wealth management was an increasingly important part of the financial services sector in New Zealand.

He said while the wealth division was not a high-margin part of the banking business, it was an important one.

ANZ is the odd one out of the New Zealand banks when it comes to funds management at present. The other banks tend to lean more heavily on outsourcing their operations.

But banks have dabbled in the sector many times over recent years, moving in and out of funds management.

National Bank owned Southpac then decided investment management was not its core business and moved on.

Westpac owned Bankers Trust (BT) outright for about five years before deciding to float it in 2007. It was revealed last year that many of the BT team in New Zealand has moved on to set up a new boutique, Salt Funds Management.

But ANZ Investments, recently rebranded, is focusing firmly on in-house wealth management.

It was named the FundSource Fund Manager of the Year for the second year in a row last year.

Body said the criticism that wealth management was not “core business” for banks, and that they preferred to focus on higher-margin product manufacture and distribution, was outdated. “Banks can and do make good fund managers. The key lies in being able to build capability around people, governance and making sure it’s well managed.”

He said the scale of a bank gave it access to global managers for the funds it did not directly manage, which a smaller or boutique firm could not afford.

One of the managers of ANZ’s KiwiSaver funds is top global manager MFS. Its performance is partly what has driven ANZ’s KiwiSaver fund to the success it has reported over recent years.

ANZ now has a total of $16.5 billion under management across wholesale and retail, KiwiSaver, private bank and bonus bonds. There is $4.6 billion invested in its KiwiSaver fund alone.

Body said the New Zealand funds management industry had improved a lot in recent years and was delivering credible, good returns for investors and was well managed.

He said there was space for new entrants, provided they were well capitalised and managed and able to engage with investors. “It’s certainly not a risk-free ride but there’s room for good new entrants.”

New Zealand still had a challenge with the size of the capital market versus the assets that were available to invest, he said. “We need to get the right global asset allocation in portfolios. The hometown bias is a bit too strong across New Zealand in general.”

He rejected suggestions that banks were becoming too dominant in the sector. “It’s a market where the cost of moving is incredibly low. Investors will make the decision about where they want to be… they determine what the industry looks like.”

Andrew Bascand, of Harbour Asset Management, said globally fund managers with multi-decade success were those where at the top and core of the organisation the focus was on asset management, not banking: "History tends to confirm that the best asset managers are those that focus their businesses on managing investments rather than distribution."

Comments from our readers

On 14 February 2014 at 10:13 am Mac said:

Can banks make good fund managers? No. Banks can buy good fund managers, bask in the short term glory, and then return to mediocrity.

On 14 February 2014 at 4:15 pm Ignorance is bliss said:

The reality is that 'talent' doesn't tend to reside for long in financial institutions, with greater attractions available through boutique offerings.

Opposing thoughts to this tend to originate from those financial institutions themselves, who continually attempt to convince the industry that their offerings provide comparative advantage

On 18 February 2014 at 8:45 am Egor said:

Banks are the safe option for those who need the comfort of a big bank brand to sleep well at night. OK at best in a stable market and potentially costly in a volatile market. There's a world of fund manager choices out there but most people don't have the inclination to look a little harder. More often than not they have to contract in the talent which raises an issue around cost layering.

Can banks make good fund managers?

Banks can be just as good fund managers as anyone operating in the industry, ANZ’s managing director of wealth says.

Thursday, February 13th 2014, 6:00AM 3 Comments

Comments from our readers

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