All the way with the platform play

When Perpetual, and more recently Credit Suisse Asset Management (CSAM), decided to push headlong into the platform game, it signalled more than just a few more players moving into an already crowded master trust and wrap market.

Both Perpetual and Credit Suisse have a strong history as classic investment managers with well-known retail branding, so their respective moves speak volumes not only for the future of platforms, but also the retail fund sector.

At the very least, the move by both groups appears to confirm the passing of retail fund management as a major investment vehicle.

It also throws into doubt a prevailing notion that the platforms sector in Australia is now at a mature stage — where a small number of larger players, which have been in the market for many years, will continue to dominate the sector unchallenged.

CSAM head of platform development Robert Hayward acknowledges the launch of MasterWrap last month was motivated by a market shift away from pure retail funds.

Hayward says CSAM was left with few options “given that up to 90 per cent of money in the market is coming through master trusts and wraps”.

One option was to close or sell its retail funds and revert to CSAM’s historical practice of maintaining a presence only in the institutional manager space.

This was discarded on the basis of the time and expense invested in branding, marketing and achieving legal compliance for its retail funds, he says. CSAM launched into the pure retail funds space about five years ago, targeting its product at advisers and to some extent the direct markets.

“Another option was to add external manager options to our existing retail products, but CSAM felt its structure and pricing wasn’t really appropriate anymore,” Hayward says.

“Realistically the only way we could do that in the current retail market environment was to launch a platform.”

MasterWrap now offers 72 investment options from 24 external fund managers, as well as 18 CSAM investment options.

Some CSAM retail products remain outside the platform, but Hayward says there is a “reasonable expectation” these will decline over time.

The launch of MasterWrap is a clear sign the platform sector is “far from mature”, a concept Hayward believes is being promoted by some big providers to discourage competitors.

“Our view is that ongoing changes in pricing, consolidation and technology make it hard to classify the sector as mature in a typical marketing product sense,” he says.

Perpetual general manager adviser distribution Damian Crowley says the launch of its WealthFocus platform last year was a “defensive” move to protect its existing retail funds under management.

“The message from our advisers was that writing pure retail requires high maintenance,” Crowley says.

“Perpetual needed to offer a low-touch retail master fund.”

He says WealthFocus was also a natural progression for Perpetual, which already had some presence in the market with its existing platform, Composer.

Crowley says extensive Perpetual research into the platform sector revealed it is “essential for the investment menu of a new platform to be absolutely spot on”.

“Basically we’ve built the menu based on feedback from advisers on who they are using now, rather than three or four years ago.

“We’ve also made sure we don’t offer too many Perpetual investments and our external manager options are completely independent.”

The platform has most of the majors on board, Crowley says, including five InTech funds, as well as ING funds, AXA, Colonial First State, Barclays Global Investors, and Principal Global Investors.

Perpetual’s platform marketing strategy has been to target the groups it can build a closer relationship with in the retail market.

“There’s about 25 dealer groups that have approved the fund as particularly attractive to them, so we haven’t tried to pretend WealthFocus would be attractive to the whole market.”