Pressure’s on for ‘old-style’ funds

THE evolution and availability of new funds is placing pressure on older-style, retail non-master fund products.

Figures released recently by research house Morningstar and researchers Plan For Life show that the appeal for ‘old’ products such as insurance and friendly society bonds has fallen sharply in the past quarter. During the same period, (the March quarter) new master fund products picked up the slack, growing by more than $6 billion.

“Graceful decline remains the key motif for most older-style, retail non-master fund product types,” the Morningstar/Plan For Life report says.

Approved deposit fund assets now represent just 0.29 per cent of overall retail managed fund assets, falling by more than $120 million in the past 12 months to $820 million.

Deferred annuity assets fell by almost $1.4 billion over the year and $300 million in the past quarter to $8.23 billion.

Friendly society bond assets were down $185 million over the year to reach $3.4 billion, while insurance bonds slumped by more than 10 per cent in the year to $5.3 billion.

The only older-style retail funds to withstand the decline were those held as immediate annuity assets. These funds increased $221 million over the year to $10.55 billion at March 31.

The report shows that retail superannuation master funds, propelled by the compulsory superannuation regime, remains by far the largest retail managed fund product type overall, at $91 billion on growth of $11.68 billion during the year.

“Legislated funds flow from the compulsory superannuation regime remains supportive of the Australian managed funds industry,” Morningstar analyst Joel Aurisch said.

“This creates growth in managed fund net assets, despite the recent backdrop of hesitant global economic recovery affecting returns delivered to investors.

“However, the spin-off effects on fund assets and funds flows of recent intensive merger activity will be interesting to watch over the next few quarters.”

Master funds also were beginning to make their mark on the sector, now accounting for 49.56 per cent of managed fund assets, up from 47.29 per cent a year earlier.

The Commonwealth/Colonial Group and National Australia/ MLC funds management groups still wear the mantle as undisputed market leader, together accounting for a third – or $88.38 billion – of Australian managed fund assets. Both groups have more than $40 billion in managed assets after together attracting a further $10 billion in the past year.

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