Australian investment managers buck global trend

Australian investment managers have gained a larger slice of Towers Watson's global investment manager rankings, reaching their highest levels of funds under management (FUM).

Twenty-three local investment managers with an aggregate level of FUM in excess of US$1 trillion have been included in the Pensions and Investments/Towers Watson World 500 research, five more than last year.

They bucked the trend, as global investment managers experienced declining FUM, with levels sinking to below the US$64 trillion reported in 2006.

Growth in FUM was not a reflection of the appreciation of the Australian dollar, but a mix of factors including organic growth, acquisition growth and market valuation shifts, according to Towers Watson head of research Hugh Dougherty.

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He said the results shone a positive light on the Australian industry's relative strengths, particularly in light of the volatility in 2011 and unpredictable performance depending on size, strategy and asset class.

Macquarie inched up three places to be ranked 66 overall, and represented the largest Australian investment manager.

The largest 20 global asset management firms, dominated by bank-owned asset managers, faired worst in 2011, with assets under management declining significantly. Towers Watson attributed this to clients looking for lower-cost options, and a need for those managers to reduce product proliferation and align fees with client outcomes.

"Institutional investors are increasingly looking for the most efficient way to invest their assets, which has led to more passive management and low-cost, systematic approaches, also known as smart beta. These investors are quite rightly becoming far less tolerant of paying active management fees for simply getting market exposure, and are looking to obtain the latter as cheaply and efficiently as they can," he said.