Performance Magazine - September 2017

In this edition of Performance Magazine we take a trip down under to Australia, home of kangaroos, koala bears, and a AU$2.7 trillion wealth management industry.

Despite its relatively low population of around 20 million people, Australia punches well above its weight with regards to the wealth management industry.

Australian wealth was originally built off the gold rush of the 1850s, and since that time has mined multiple other natural resources across the breadth of the country, including coal, iron ore, and lead. Australia has also benefited from the growth of Asia, and specifically China, which helped it navigate a relatively untroubled path through the 2007-2008 global financial crisis.

Local legislation in Australia requires all Australians to contribute a portion of their earnings (currently 9.5 percent) into “Superannuation Funds” in order to generate an income stream on retirement. These contributions have been a key driver in growing the Superannuation sector in Australia, which is now the fourth largest in the world and ranked second in the Mercer Global Pension Index.

Deloitte Actuaries have predicted Superannuation funds will continue to develop, reaching an estimated AU$9.5 trillion by 2035. Alongside the continued rise of the Asian economy, the Australian wealth industry is ideally placed to participate.

As the Australian wealth market has grown, there has been a steady increase in portfolio diversification, with significant
opportunities for fund managers across the globe. The size and accumulation nature of the sector has also fostered the growth of world-class infrastructure investors. Australia was home to some of the world’s first infrastructure financial assets, and it continues to be a market leader in this sector with globally recognized managers such as IFM Investors, Macquarie, AMP Capital, and QIC.

In a previous edition, we published an article by IFM Investors in relation to implementing currency hedging. Now we interview QIC’s Chief Executive Damien Frawley to understand his view on infrastructure assets in Australia and overseas and why he thinks it is an investment with multiple benefits.

As the sector grows, so does its sophistication and inevitably the regulatory oversight. This regulation is as multifaceted as always, but in this edition we look at Operational Due Diligence and what local and overseas investment managers should expect as requirements come into place.

To unpack the consequences of these additional requirements, we have spoken to Philip Hope, the previous CEO of Morse Consulting and now consulting Partner in Deloitte Sydney.

In summary, Australia’s unique superannuation system has driven a large, diverse, and sophisticated market with world-class skills in asset classes such as infrastructure—a system that will drive continued growth opportunities for local and overseas managers albeit with increased regulatory demands.

• Interview: Infrastructure in Australia
  Interview with Damien Frawley, Chief Executive at QIC
• Where do we go from here?
  The maturation of operational due diligence of outsourced investment management in Australia
• Capturing the multi-trillion dollar asset management opportunity in Southeast Asia
• Disruption
  A new way to generate alpha
• New risk
  In a time of uncertainty and change
• Blockchain & Cybersecurity
  Let’s Discuss!
• Investment fund distribution
  How will innovative thinking in fund distribution create a competitive advantage?
• A more objective alternative for pension fund reporting
  
• Making Japanese M&A work for companies and investors
  
• Expecting a smooth evolution of AIFMD