There are clear signs the managed funds industry is shifting focus from manufacturing retirement savings accumulation vehicles to post-accumulation products designed to produce income during retirement. Australian managed fund launches in calendar 2007 were dominated by funds investing in domestic and global shares and global real estate.
Over the course of the calendar year, we added another 868 managed funds to our database – up on the 543 new funds in calendar 2006 – bringing the total number of funds to 14,645, including 4187 funds which no longer exist but which we maintain for historical performance comparison purposes.
Of the 868 new funds, 36.75 per cent were investment trusts, 35.0 per cent allocated pensions or term allocated pensions, and 28.34 per cent superannuation funds. New investment strategies accounted for 123 of these 868 new funds, or 14.17 per cent. The remaining 745 funds represented the addition of existing investment strategies to master trust platforms. Skandia launched the most funds in 2007 – 255, up from 123 in 2006 – a long way ahead of the next most active product manufacturers (Colonial First State, AMP, Challenger, and Statewide).
The most popular categories for new launches were large-cap blend-style international and Australian share funds; large-cap growth Australian share funds; and global real estate funds.
Fund launches by legal type
Among the 868 new managed funds, 319 (36.75 per cent of the total launched) were investment trusts designed for general savings and investment, while a further 303 funds (35.0 per cent) were allocated pensions or term allocated pensions catering for the growing segment of the population seeking vehicles to fund income during retirement.
A further 246 superannuation funds also appeared in 2007 (28.34 per cent of the total number of funds launched). This was a clear shift from calendar 2006, when fund launches were dominated by superannuation funds (44.93 per cent of new fund launches), and when allocated pensions and term allocated pensions accounted for 22.65 per cent of new funds. Demographics and fund managers’ responses to the needs of the ageing population base are likely to sustain this trend in coming years.
Fund launches by institution
Skandia was again the institution which launched the most funds: 255 in 2007 (Figure 1), in addition to the 123 funds the company launched over the course of 2006. Just under a third (29.37 per cent) of all Australian managed funds launched in calendar year 2007 were Skandia options. (Skandia’s business model as an administration platform provider offering access to other fund managers’ investment strategies, rather than undertaking investment management itself, means that the addition of a new investment strategy entails the creation of new options for each of the firm’s platform menus.)
This number of launches put Skandia a long way ahead of the other major players in product manufacturing; Colonial First State (74 new funds, up from 58 the previous year); AMP and Challenger (71 each); and Statewide Superannuation (70 new funds launched in 2007).
Fund launches by category
Australian and world share funds dominated fund launches in 2007 as they did in 2006. Although specialist funds continue to be marketed aggressively and attract media attention, this is not an accurate reflection of overall trends in product manufacturing. The categories which had the greatest number of new additions in 2007 were the broad groups of World Large-Cap Blend (88 new funds), Australian Large-Cap Blend (70), Australian Large-Cap Growth (61), and Australian Large-Cap Value.
The 2007 calendar year also saw the continuation of a notable trend over the two previous years, with 45 new funds in the Global Real Estate category in addition to the 38 launched during 2006. Looking more closely at the Australian share fund categories, new launches were dominated by blend-style funds, 70 of which appeared during 2007 (up on 45 in 2006), followed by Large Growth (61 new funds, 47 more than in 2006), and Large Value (44, up on 13 the previous year).
New entrants to the mid-/small-cap categories were headed by Mid-/Small-Cap Growth (11 new funds), and Blend (three), while only one new Mid-/Small-Cap Value fund appeared, namely Investors Mutual Small Cap. The 2007 year also saw 11 new geared share funds make their entrance, against a backdrop at that time of several consecutive years of double-digit returns from the domestic sharemarket.
The 88 new funds in the World Large Blend category accounted for just under half (46.80 per cent) of all new funds in diversified world share categories in 2007. This was substantially more than additions to the World Other (28), World Large Growth (27), and World Large Value (20) categories, and very different from 2006, when launches were dominated by World Large Growth options.
While diversified funds investing across world sharemarkets remained fund managers’ preferred launches, funds investing in Asian stocks and the emerging markets were also popular choices, with 19 new Asia ex-Japan funds and 11 new emerging markets funds making their entrance during 2007. Other popular categories for launches were Australian Real Estate (35 new funds), Unlisted/ Direct Property (20), and Global Infrastructure (12 new funds).
Among the income fund categories, Mortgages – Aggressive headed the list for new additions during 2007, with 27 new entries. (This category is the home for the riskier mortgage funds which invest in second mortgages, loans for development or construction, or lend over more specialised property assets.) This was followed by 23 new Cash funds, and a broadly similar number of new options in the Australian Bonds, Global Bonds, and Global/Australian Bonds categories.