FundSource finally sold, but competition for research heating up

The new owner of FundSource, Zenith Investment Partners plans to continue with the fund manager of the year awards, but others are looking at the research market.

Friday, June 7th 2019, 6:00AM

Melbourne-based Zenith Investment Partners says it has finally completed its purchase of managed funds research business FundSource and is now looking to develop its strategy in New Zealand.

It's understood Zenith didn't pay anywhere near what the NZX expected to sell FundSource for. Rather it paid for the brand and goodwill.

However, Zenith is planning to continue the most profitable part of the business, the annual Fund Manager of the Year awards. The large majority of the researcher's revenue comes from selling licenses to the winners so they can promote their gongs. (Morningstar has a similar strategy).

Under NZX-ownership the quantitative research function was outsourced to Australian company Research IP. Its managing director, Darren Howlin, says the company completed his contract with FundSource in September last  year.

Zenith says it hasn’t talked to Howlin about continuing the role, but it plans too. Howlin says he has heard nothing from either FundSource or Zenith.

Howlin says he has not been contacted by any parties regarding the sale of FundSource, since the initial expression of interest. That includes post the recent conditional sale announcement.

Good Returns asked Zenith co-founder David Symthe who owns the intellectual property behind the research. His view is that it is FundSource, however Howlin says he owns the RFIs, managers’ documentation, review meeting notes and qualitative engine.

“Research IP has employed its proprietary process and system to produce the qualitative reports. From 2015, all reports produced by Research IP were done so in accordance with its agreement with FundSource.”

Howlin has been working in the New Zealand market since 2007, initially with advice groups and then research houses Lonsec Research and Research IP. Research IP has maintained a strong relationships with New Zealand fund managers and financial advisers since launching in 2014.

Smythe said Zenith had looked at the New Zealand market for some time and now was a good time to enter the space as the only provider was Morningstar.

However, Morningstar's former head of manager ratings in Asia-Pacific, Chris Douglas, says there are other potential competitors. Douglas is now a principal at My Fiduciary.

He said Zenith could end up a competitor of sorts to My Fiduciary, which is developing a model portfolio and research service for advisers.

The number of clients using it was expected to grow in the coming months, he said.

"There's definitely a need for good research," he said.

What was needed was breadth of research, good conversations and quality research as well as discussion and debate about products and how to use them.

Douglas said most markets had many more research options than New Zealand, which had "stuttered along with one-and-a-half".

He said many adviser groups were doing it themselves but that was not necessarily the most efficient option.

Tags: Darren Howlin FundSource research Zenith

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