END OF ERA FOR FUNDS
THE end of an era looms for fund managers as consolidation across super and investment funds will drive mergers and acquisitions in boutique firms.
One of the pioneers of the industry, renowned Sydney stockpicker David Paradice, said a wave of mergers of super funds will in turn drive demand by them for the fund managers investing increasingly bigger amounts of money to also consolidate.
“It’s so much tougher out there. Clients are consolidating and focusing very heavily on costs and performance on the time,” Paradice said. “The government is pushing for (super) funds to get bigger. Whether that is good or bad, it just means they are so big they need to get massive amounts of money around. So in the short-term I definitely think it’s going to be harder to set up as a boutique.”
This week it emerged Cbus, the $67bn construction industry super fund, is in talks with two more smaller funds about merging as part of its bid to become a $150bn fund, the latest in a string of deals for super funds.
Fifty per cent of Paradice’s eponymous firm, which looks after about $18.2bn of super and investment fund money, was snapped up by ASX-listed Charter Hall on Wednesday in a deal valuing Paradice Investment Management at about $414m.
Paradice, 62, who has built his reputation on picking winners in the small and mid cap sector, said other firms will struggle to maintain their relevance as the sheer amount of superannuation money grows bigger, and potentially shifts overseas. “There are a lot of Aussie fund managers that are struggling out there but what is happening as the super market gets bigger here, a lot of money is going offshore. If they are not careful they will run out of fund managers.”
Charter Hall shares closed 1.4 per cent, or 7c lower, at $5.01 on Wednesday.