Fund managers move away from retail products
Founding director and chief analyst of Foresight Analytics Jay Kumar has noticed two key developments when it comes to investment products over the past 12 months.
The first trend is a focus on wholesale products by fund managers and product issuers, as retail products become less common.
"One big picture observation is that we have seen a significant rotation or channel diversification by asset management firms to focus on wholesale," he says.
"What we have seen is the Royal Commission and all types of reviews and regulatory disruption in the superannuation industry, and internalisation of capabilities by big super funds. [The] rationalization of, or consolidation in, the super industry itself has accelerated the trend towards a focus on not just institutional but also wholesale."
As a result, next generation platforms like Netwealth and Hub24 are seeing increasing inflows as asset managers are able to access the adviser intermediated market through those platforms with wholesale offerings
"We have certainly seen the trend towards ETFs obviously, particularly active ETFs, [and] that's part of the broad channel diversification by asset managers," Kumar said.
The other main trend is towards an increasing number of alternative or private asset type funds or investment options, which has been both demand and supply driven.
"The second point I would make is that the trend on asset allocation, where the propensity to allocate into alternatives and unlisted assets has grown quite significantly," Kumar says.
"I think the key reason is really the trends in interest rates, and the desire for advisors and investors to protect capital against rising interest rates in the future. That's why the investments in private debt and private assets have increased substantially because there is no mark to market and they are a better hedge against interest rate rises."
On the supply side, much of the product innovation is being driven by disintermediation and the move away from banks and traditional providers of credit towards private entities providing credit and pooled vehicles providing private debt and private credit.
Foresight has been rating more products of this nature, and recently gave the SocietyOne Personal Loans Trust a Very Strong rating and the MaxCap CRE Debt Fund 3 a Superior investment rating.
