Negative market movements, coupled with net outflows, have prompted a near $6 billion decline for Challenger’s funds management business in Q3.
In an ASX announcement, the investment manager saw its funds management division’s FUM fall by $5.9 billion, or 5 per cent, to $115.2 billion.
Challenger’s funds management business comprises Fidante and Challenger Investment Management (CIM).
This was due to $3.7 billion in negative market movements, $1.9 billion in net outflows, and $300 million in client distributions. Net outflows included the derecognition of $800 million in FUM from Merlon Capital Partners.
Last July, fund manager Merlon Capital Partners acquired the minority stake in the business that had previously been owned by Fidante, Challenger’s asset management arm, although Fidante remains the responsible entity.
During the quarter, Fidante also welcomed global long-short manager System Capital to its stable of affiliate managers.
Meanwhile, the firm’s group assets under management was also down by 4 per cent for the quarter from $131.4 billion at the end of December to $125.6 billion.
Looking at Challenger Life, the division reported total life sales of $1.4 billion, while annuity sales increased by 20 per cent to $1 billion and fixed term annuity sales rose 15 per cent to $505 million.
“Across our retirement business, Challenger maintained momentum through the third quarter, continuing to broaden our customer footprint while making significant progress delivering new technology for the future,” Challenger CEO Nick Hamilton said.
Looking ahead, the CEO said the replatforming of its retirement customer technology is an “exciting phase” as the build completes and it tests for launch.
“Removing sales frictions and integrating lifetime and term income solutions seamlessly for advisers and funds will enable the next phase of our growth,” Hamilton said.
The investment manager announced a new partnership with NGS Super this month. From 2026, this will see Challenger’s longevity solution form part of NGS’ broader retirement income strategy, providing their members with guaranteed, regular income for life, it said.
Also during the three-month period, it was announced that insurer TAL had taken a minority stake in Challenger. Namely, TAL Dai-ichi Life Australia will acquire a 15.1 per cent minority interest from MS&AD Insurance Group Holdings for $8.46 per share. This represents a 53 per cent premium to Challenger’s closing share price on 4 April, it said.
Hamilton said: “We welcome TAL Dai-ichi Life, a global leader in life insurance, as a material shareholder of Challenger, which recognises the strength of Challenger’s strategic position, unique capabilities and the long-term tailwinds in the Australian retirement market.”
Challenger also tightened its FY24–25 normalised net profit after tax guidance to a range of between $450 million and $465 million, with the midpoint of the range representing 10 per cent growth on FY23–24.
