Opalesque Australia Roundtable: Australian fund managers "a breath of fresh air", says Julian Robertson
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When Julian Robertson last visited Australia he said Australian fund managers are "a breath of fresh air", operating in a ”financial environment far more promising” than what he sees back home in the U.S. At the same time, he was surprised how little institutional money the hedge funds here were running. Over one year has passed since those comments, and our Opalesque 2012 Australia Roundtable held in Melbourne in May gives an in-depth update on this fourth largest pension market and its impressive hedge fund community.
Performance of Australian hedge fund managers in aggregate is very good, outperforming both offshore peers as well as their local benchmarks
Aussie hedge funds are strong performers with astute risk management, but so far, large Australian institutional investors often focused their attention offshore for global absolute return exposure, however currency and hedging costs have been a big drag on performance. Australian asset consultants and large investors have therefore significantly added internal research capabilities directed at alternative investments and started to allocate more to domestic hedge funds.
The asset base of Australia's superannuation funds, where employers have to pay a minimum of 9% of every employee's salary to a registered fund, stands now at around A$ 1.4 trillion and keeps rising. However, 36% of those assets are now managed in selfmanaged superannuation funds or SMSFs. These are essentially individuals who want and are able to manage and be responsible their their own financial retirement and represent the largest single segment of the superannuation industry.
How Aussie hedge funds set up multi channel distributions, expand overseas and deal with fee discussions
Some Australian hedge funds have successfully set up multi-channel distribution to retail, mezzanine, institutional, high net worth and strategically target these SMSFs. In addition, a number of Australian funds have opened offices in Hong Kong or Singapore over the last 12 months. The main motive is to be to closer to the investors from North America and Europe traveling to Asia.
Australian hedge funds successfully market to high net worth individuals and fund of funds, whose primary focus is on performance. The typical hedge fund fee structure in Australia is 1.5% management fee and 20% performance fee. Despite frequent debates over these fees, smart institutional money understands that exceptional talent is in short supply, and are therefore prepared to pay for it. As elevated volatility will be around for a while, Australian and global investors are forced to look at fee-adjusted return and other parameters like volatility-adjusted returns and returns per unit of risk.
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