Impact of super fund IM insourcing confirmed

Mike Taylor

Managing Editor and Publisher

24 October 2023

The decision by superannuation funds to take investment management in-house has played a role in Australian asset managers falling down the global rankings scale.

The latest rankings, undertaken by the Willis Towers Watson Thinking Ahead Institute reveals that not one single Australian asset manager has made it into the global Top 20, with Macquarie Group our best sitting at number 48 in the rankings.

Thereafter, just 25 asset managers make it into the Top 500.

Australian asset managers ranked by total AUM, in U.S. millions.

Overall, it was a tough year for investment managers globally with the research reveraling a 13.7% drop, the first significant decline in assets since the Global Financial Crisis.

The analysis revealed there were some differences by region. Japanese managers within the world’s largest 500 fared much better than average with a 5.5% decrease in assets, while North American asset managers saw a 14.2% decrease and Europe (including the UK) experienced an above-average 16.8% decrease. Australian managers experienced a relatively resilient year, with their AUM decreasing by 6.6%, affected also by the weakening Australian dollar.

The research also revealed the continued evolution of active versus passive assets under management among the largest investment managers. Investment in passively managed funds grew to account for 34.7% of the total, as of 2022, up 4 per centage points from the previous year.

Notably, among the world’s largest managers, this still leaves a considerable majority of 65.3% actively managed assets.

Australian managers included in the largest 500 with meaningful active equity exposure also suffered from the move from active to passive strategies, as some superannuation funds continued to de-risk their portfolios under the Your Future Your Super (YFYS) regime.

Commenting on the data, WTW Australia head of research and co-portfolio manager, Leslie Mao said even though Australian equities performed better than many other developed markets in 2022, local managers with more exposure to equity business saw their rankings decline.

By comparison, managers with exposure to alternative asset classes such as infrastructure and real estate stacked up reasonably well. Macquarie Group recorded a seven place gain in rank to be in the world’s top 50 this year, up from 55 the year before.

“Another factor that saw a drop in AUM among Australian managers is the ongoing consolidation and internalisation happening within superannuation funds. Some managers, regardless of how they performed, lost assets during this period.”