When all asset classes are under pressure, as they are at the moment due to the credit crunch and sharemarket volatility, the stress often flows through to funds management businesses, manifesting through fund outflows and other distractions.
Mr David Bryant, head of Australian Unity Investments (AUI), said that the current pressure makes the ownership structure of fund managers, particularly boutiques, an area that investors should take into account.
"Investors need to be comfortable not only with the long term aspects of their portfolio and the advice they are getting, but also with the financial backing of any asset manager looking after their money.
"It is times like now where the resources of a sizeable, financially stable and well-managed entity standing behind them, can make a difference, which by definition doesn't always occur with boutique operations.
"There is a danger at times like these that asset managers who are also business owners and managers can be distracted from their investment role.
"In strong market conditions with steady fund inflows, boutique managers were protected from many business stresses. But a continuing market correction that reduces fund manager profitability could easily result in some boutique managers coming under pressure.
"This pressure is not just financial but could also result from a lack of management diversity needed in any business during times of crisis.
"For such reasons, investors must take into account the ownership of the fund manager when assessing the risk of investing with a particular fund," Mr Bryant said.
AUI has been involved in setting up joint ventures since 1998 and currently has partnerships with three boutique fund managers - microcap equity managers Acorn Capital, fixed interest managers Vianova Asset Management and Australian equity managers Platypus Asset Management.
It believes that this model gives boutique fund managers additional business management, compliance, and financial support, as well as the broad reach of a marketing and distribution infrastructure.
"Our own philosophy is to support fund managers in such critical areas, allowing them to get on with managing money.
"In doing this, we are also adding a level of investor protection by ensuring first class compliance and disclosure systems areas where asset managers may not have in-depth expertise.
"Fund managers that get distracted by all the additional, but very necessary, aspects of running a funds management business can easily take their eye off investment opportunities and this isn't the time in investment markets where investors want that to be the case," Mr Bryant said.
Australian Unity Investments is the funds management arm of financial services, health and retirement living services provider Australian Unity. It has over $6 billion in funds under management. Its approach to product development is to use its established in-house expertise in property and mortgages while also forming joint ventures and strategic alliances with other organisations with specialist expertise.
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For further information, please contact:
David Bryant
P 03 8682 4401
E dbyrant@australianunity.com.au