Challenger gets HSBC bargain for a reason

The apparent bargain price paid for HSBC Asset Management Australia (HSBCAMA) by Challenger Financial Services could reflect capacity constraints in its listed property business and problems in its Australian equity business, researchers have suggested.

Challenger has confirmed it will pay $21.9 million for HSBCAMA, well under 1 per cent of its $3.2 billion under management.

Standard & Poor’s placed most of HSBCAMA’s funds ‘on hold’ in reaction to the news, and expressed some alarm at the transition of its highly regarded property and small caps teams to Challenger.

Challenger said HSBCAMA’s listed and direct property capabilities would “add an important fourth bow” to its Australian equities, fixed interest and mortgage trust capabilities, but InvestorWeb analyst Rodney Sebire pointed out the acquiree was already close to capacity in Australia’s small listed property trust market.

Sebire said researchers would also be anxious to know the future of the relationship with Fortis Funds Management, whose outsourced advice on direct property has been integral to HSBCAMA’s success in that asset class.

A Challenger spokesperson said more details of the acquisition would be released upon its finalisation at the end of the week.

The spokesperson did confirm that HSBCAMA chief executive Barry Sheehan, and chief operating officer Stuart Nixon, would depart after assisting with the transition.

HSBCAMA chief investment officer, Jon Taylor, left the manager three weeks ago.