Wall Street wins more of Australia's pension pot

The Star

a day ago

Industry assets: A man walks by the JPMorgan Chase headquarters in New York City. The Wall Street giant, along with the other big US banks, is jostling for fees from the sprawling equities and private asset portfolios amassed by Australian pension funds. — Reuters
NEW YORK: Australia's pension funds are rapidly boosting their allocations to the heavyweights of US finance as rivalry heats up for access to the country's A$4.1 trillion (US$2.7 trillion) retirement pot.
State Street Corp's assets under management in Australia surged 50% in the 15 months through March to A$427bil, and most are with superannuation funds, the Boston-based firm said in response to questions.
JPMorgan Chase & Co's have grown 55% in the past 12 months, while Morgan Stanley doubled its Australian mandates to more than A$25 billion.
Asset managers are jostling for fees from the sprawling equities, fixed income and private asset portfolios amassed by a sector raking in near A$4bil a week.
About half of industry assets are now offshore, and almost a fifth in private markets, as mega-funds like AustralianSuper, Australian Retirement Trust and Aware Super outgrow their own backyard.
'It is very, very competitive,' said Andrew Creber, who heads JP Morgan Asset Management for Australia and New Zealand, adding that the firm had some 'sizeable wins' in global equities and alternatives mandates recently.
'Given the size and scale of our organisation, we're able to leverage the breadth of the organisation to be competitive in price,' he said in an interview.
For Morgan Stanley Investment Management Australia, the main growth in pension mandates is coming from listed equities, global fixed interest and private credit.
This reflects 'a trend for asset owners to partner and do more with fewer asset managers,' said managing director Daniel Vanden Boom.
While the asset managers we spoke to didn't disclose details of specific mandates, data compiled by Bloomberg provides a snapshot of who's winning business in the areas of fixed income, private markets and alternatives.
Industry funds – so called because they were initially created for workers in specific sectors – hold more than a third of the country's retirement savings.
'Experience and scale are key to private markets investment,' David Neal, chief executive officer of IFM, said in a response to questions.
'As more investors look to the Australian super model for their own portfolios, we see the potential for significant growth in these asset classes moving forward.'
Australia's pension funds don't disclose external manager data for their massive listed equities portfolios, which comprise more than half of their total assets.
Australia is on track to surpass Canada and the United Kingdom to become the world's second-largest retirement system by 2031, according to recent industry analysis.
The system is fuelled by compulsory workplace contributions worth 11.5% of wages, which will rise to 12% in July.
As the industry grows, however, funds are increasingly internalising their investment teams.
At the same time, the pensions have become tough negotiators on fees due to regulator scrutiny, meaning mandates have become increasingly hard fought.
Most funds directly oversee between 15% and 35% of their assets internally, according to analysis from Chant West.
Currently, only AustralianSuper and UniSuper manage more than 50% of their assets themselves, the research house said. — Bloomberg