In an attempt to boost the performance of its flagging funds management business, Colonial First State (CFS) is about to set up a new outsourcing deal with a major global player.
CFS was unable last week to disclose the name of the fund manager with which it will strike an alliance.
A new outsourcing partnership will soften the blow of last week’s collapse of negotiations with Peter Morgan’s Australian equities boutique, 452 Capital, which had aimed to parlay CFS’ exclusive retail distribution deal into an equity stake.
However, CFS head of wealth management John Pearce said the new deal did not foreshadow an outsourcing of all internal funds management, despite disappointing returns over the past two years.
In fact, Pearce said CFS would soon be launching an offshore global resources fund and an enhanced yield fund, both to be managed internally.
He played down the results of last week’s Assirt market share report which found CFS had lost $1 billion in the December quarter of 2004, while most of its competitors all grew in funds under management.
“Nobody is in net-inflow in terms of stand-alone retail products at the moment.
“So the more salient point of this Assirt report is to actually look at the overall retail funds flows and if you look at the platform space, the Commonwealth Bank/CFS group is miles ahead — but we’ve obviously had outflows from our stand-alone retail products.”
Pearce said it was unlikely that CFS’s internally managed funds would be taken off any CFS platforms because of poor performance, although he did say that could happen if the market were to demand it.
“We made a decision recently to reduce the allocation of our Australian equity leveraged fund for example. We’re proving to the market that we’re going to take a really level-headed approach to this and produce what the market demands,” he said.
News of the new global alliance comes just weeks after the CBA decided to separate Colonial First State’s funds management manufacturing from its broader wealth management business.
Pearce acknowledged the move was made to try and increase in-house fund performance.
“If you look to our major competitors, the boutiques that are springing up — the Perpetuals of the world — to be able to compete with these people, these organisations, you’ve got to develop similar structures and compensation schemes,” he said.
“And we thought the best way of achieving that is to create a stand-alone investment management entity.”
From an advisory perspective, CFS manager of retail distribution Richard Nunn said the restructure, which also resulted in all CBA owned dealer groups — including Financial Wisdom, Enterprise 121 and Commonwealth Financial Planning — being brought under Colonial control, would create more streamlined dealer services.
“We’ve always had good support services for all of our advisers, but what we’ve never done is try to run them more efficiently so there is less duplication.”
