Speaking to InvestorDaily, ASX senior manager for investment products Andrew Campion said the investment management value chain should be more aligned with the people who actually generate wealth for investors – fund managers.
“We feel that presently too much value is eaten up by administration services. It's not the actual person or firm that's generating wealth for the end client,” Mr Campion said.
“If you squeeze the fund manager they just have less money to spend on research and less money to incentivise their staff,” he said.
This conviction is reflected in the relatively low fee ASX charges fund managers for inclusion on the mFund settlement service: 1.4 basis points (bps), or 0.014 per cent.
“If you look on a PDS for a fund manager and you see their expense ratio is 70 bps, 1 per cent or 1.2 per cent – they might be getting far less when they're on a platform. Sometimes less than half as much,” Mr Campion said.
Sometimes a fund manager using larger platforms can be “squeezed” down to a fee of as low as 15 basis points “even though their direct retail fee structure is 70-80 bps or 1 per cent”.
“When we talk to managers, they're staggered that they get to keep all of their fees,” Mr Campion said.
“We don't feel like having a website that you can log into and have statements generated should cost 100 bps.”
There are now 170 products available on the mFund settlement service, with total funds under management (FUM) amounting to $250 million (up from $110 million 12 months earlier).
The ASX recently received approval from ASIC to include longer-form PDS products on mFund, in addition to shorter-form PDS products.
Longer-form PDS products, which include hedge funds, make up 20 per cent of the approximately $300 billion Australian retail fund management sector and are likely to be attractive to the mostly self-directed investors who use mFund, Mr Campion said.
“Although it's only 20 per cent of the overall pie, we think as these funds come onto the platform it will be much more than 20 per cent of the mFund business,” he said.
Of the total $250 million in FUM on mFund, 40 per cent of it is self-directed and 60 per cent comes through advised channels, Mr Campion said.
Eighty per cent of the users of mFund are SMSFs, he added.
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