Competition in the funds management sector

Report 702 Competition in funds management presents findings from independent research by Deloitte Access Economics (Deloitte), which examined competition between fund managers with a focus on outcomes delivered to investors in retail managed investment products.

Deloitte’s research considered the structure of the Australian managed funds industry, the conduct of industry participants as well as industry performance.

The Australian managed funds industry held $2.5 trillion in assets under management in March 2021. ASIC’s regulatory work in this industry is aimed at improving investor outcomes and supporting sector development.

Some of Deloitte’s findings include:

  • retail investors are a small fraction of funds under management, at five per cent, but the managed funds industry affects a much larger number of Australians through superannuation
  • the managed funds industry is competitive, as evidenced by new market entrants, innovation and low fees by global standards
  • there is no single source of truth that allows for direct comparison between funds. Fund managers use advertising to inform and attract retail investors. In some instances advertising is misleading, despite that being illegal
  • retail and wholesale investors are sensitive to the performance of funds. Economic transaction costs affect investors’ decisions to buy, sell and change managed funds. These transaction costs are not always transparent and may lead to investors remaining in under performing funds
  • retail investors are not highly engaged with funds management. There are many intermediaries between fund managers and retail investors, which can create conflicts of interest
  • there is competition between fund managers on fees and discounts. However, retail investors may not receive the full benefits of competition over discounts, due to principal-agent and transparency issues, and
  • some participants in the managed funds industry have conflicts of interest, and this could affect outcomes for retail investors.

ASIC will take these findings into account in its ongoing work to support effective competition in the funds management industry and to improve investor outcomes.

The Deloitte report has been provided to Treasury and the Australian Competition and Consumer Commission (ACCC) for consideration.

Download Report 702 Competition in funds management

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Last updated: 24/09/2021 10:29