Challenger Ltd. (CGF)’s fund-management unit, Fidante Partners, plans to add smaller fund managers focused on international and alternative assets to tap demand from Australia’s pension funds for foreign investments.
Fidante, which started in 2005 and has A$30 billion ($29 billion) in assets, has stakes in 13 fund-management firms and wants to invest in one or two more each year, said Cathy Hales, general manager at Sydney-based Fidante. Global equities and alternative assets, such as hedge funds and infrastructure that make up A$2 billion of its holdings, will rise as pension funds seek to broaden their investments, she said.
“There is a limit to how much the Australian equity market can absorb in terms of the new cash flow,” she said in an interview yesterday. “We can see new cash flow going to some of these other areas.”
Australia’s pension or superannuation funds had assets of A$1.6 trillion as at June 30, according to the Australian Prudential Regulation Authority. Companies included in Australia’s All Ordinaries Index were valued at A$1.55 trillion.
“To purely focus on major equity market or bond market indices as the benchmark is not necessarily achieving their members’ goals,” Hales said, referring to pension funds.
Most of the fund-management firms in which it has a stake were started by Fidante, which provides administration and distribution services. The size of the holdings in each fund averages at 40 percent, she said.
Funds under management grew 56 percent in the 12 months through June and all 13 managers have outperformed their benchmarks over five years, she said.
Fidante added WyeTree Asset Management Ltd., which specializes in U.S. and European residential mortgage-backed securities, as a partner in July, according to the company. A month later, it bought a stake in River and Mercantile Asset Management LLP, an active long-only global and U.K. equities manager.
Funds are predominantly from institutional clients and those from retail investors make up less than a fifth, she said.
Among assets classed as alternatives, Hales said infrastructure is attractive for institutional clients, which include pension funds, corporate funds and insurers.
“Private assets like infrastructure assets deliver a clear investment proposition particularly to superannuation funds,” she said. “The government sees superannuation as an assistant in that process. There’ll be continued opportunities internationally and I think the superannuation funds will be interested in the diversity that brings.”
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