Production and industry consolidation likely

A survey of fund manager sustainability conducted by ratings house Standard and Poor’s has pointed to the continuing likelihood of product and industry consolidation.

The survey covered over 90 rated fund managers and confirmed that fund managers had been affected by the volatile market movements and investment flows and that some managers had been more affected than others.

It commented that manager revenues were tied to total funds under management and these revenue streams had been subjected to waning investor sentiment and market volatility.

Commenting on the result, Standard and Poor’s head of fund research Leanne Milton said in reaction managers had turned their focus firmly on cost control.

“But although many fund managers do have a strategy in place to ride out the current market slump, market conditions mean there is still a very real prospect of product and industry consolidation,” she said.

She said most managers had conveyed their commitment to maintaining client service quality and keeping to their stated Australian funds management business strategy.

“Overall, there is a sense of optimism about the eventual return of investor confidence, but a question mark remains over when that will be,” Milton said. “In the meantime, growth expectations have moderated and fund managers are focusing on their core capabilities, regularly reviewing their product offerings and limiting extensions into new products in order to position well for the future.”