Consolidation around the corner: Ausbil
The wealth management industry is ripe for consolidation according to fund manager Ausbil Dexia, which also predicted that the strong returns on the Australian market would continue.
According to Ausbil deputy head of equities John Grace, mergers on the scale of the recent union between Australian Wealth Management and Select Managed Funds are set to continue, as cashed-up companies still able to expand their margins capitalise on benevolent market conditions and compulsory superannuation inflows.
“You’ll also see [consolidation] in the banks looking towards the insurance industry, which has just gone through its own period of consolidation,” said Grace.
Grace mentioned listed funds managers Perpetual and Challenger as companies to watch for merger activity.
As for the rest of the Australian market, Ausbil chief executive Paul Xiradis predicted an ever-strong resource sector and a resurgent retail sector would push more strong gains.
He said the local share market would probably exceed the consensus forecast of 15 per cent earnings per share to around 20 per cent for 2005-06.
Xiradis said continued demand for commodities from China would not abate, and could even push commodity prices higher.
“If there is any shock on the supply side, commodity prices will remain firm because of demand.”
He said the biggest risk to the Australian market was an economic slow down. But he added that economic growth both locally and overseas, particularly in Japan, was a good sign.
Xiradis predicted materials companies would also perform well on the back of increased housing demand from owner-occupiers.
He said sectors that might underperform included telecommunications and interest rate sensitive stocks like property trusts and infrastructure companies.
Ausbil Dexia is a large, active style-neutral boutique manager with two specialist equities funds, one of them a small caps fund. It’s funds under management currently stand at $5.65 billion dollars.
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