Rise of in-house fund mgmt a game changer

Are pressures on the overall supply chain forcing systemic change in the industry ?

Rise of in-house fund mgmt a game changer

Wednesday, 6 October 2010 12:55pm

A shift of government super funds towards in-house management could threaten the raison d'etre of some of Australia's largest investment managers.

In its recently released results, state owned fund manager Queensland Investment Corporation (QIC) disclosed that its after-tax operating profits fell almost 30 per cent in the year to 30 June to $26.3 million.

Its funds under management (FUM) fell by a whopping $10.5 billion after QSuper - the super fund for Queensland government employees - decided to become a regulated superannuation fund and begin in-sourcing functions such as strategic investment advice and investment administration, which had previously been provided by QIC.

A weaker relationship between QSuper and QIC raises questions around the latter's reason to exist, potentially creating concerns for other state owned fund managers including VFMC and Funds SA.

QIC paid a dividend of $13.2 million to the Queensland government, down from $18 million in the preceding year - but that is small change for a government operating on a $42 billion dollar budget.

QIC said that it remains QSuper's largest provider of investment services, managing over $17 billion for the super fund across a variety of asset classes.

And despite the decline in FUM stemming from QSuper's shift, with $51.6 billion under management, QIC remains one of the country's ten largest fund managers as of June 30th, according to data complied by Rainmaker Information.

The fund manager has over 70 institutional clients and recent business wins include a $500 million property mandate from the country's largest industry fund, AustralianSuper, back in April.