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One Global Investment Bank Has Cracked Australia's Wealth Industry

Matthew Burgess

(Bloomberg) -- When Rachel Farrell took charge of JPMorgan Chase & Co.’s asset management unit in Australia in 2017, it was a minnow swimming in the world’s fourth-largest pool of pension savings.

Since then, she has quadrupled funds under management to A$12 billion ($8 billion) -- smashing her initial five-year target of A$10 billion -- and now has her sights set on lifting assets to A$20 billion as pension funds increasingly look to invest offshore to boost returns.

“Absolutely we can do A$20 billion in three years,” Farrell said in an interview in Melbourne. JPMorgan’s expertise in creating “bespoke solutions” and multi-asset strategies will be key to driving growth as investors shift money overseas into real assets like property and transport infrastructure that forms the backbone of global trade, she said.

Global investment banks have traditionally failed to crack Australia’s lucrative wealth and pension-management industry, making JPMorgan’s rapid growth a rare win. UBS Group AG’s funds unit is little changed from 2017 at A$49 billion of assets, while Goldman Sachs Group Inc. accepted a management buyout of its Australian-focused investment arm in 2017.

Australia is a key pillar in JPMorgan’s strategy to generate steady revenue that’s less volatile than investment banking and trading fees. The nation accounts for about one-fifth of the asset and wealth management unit’s global growth since Farrell took charge, according to Bloomberg calculations based on company filings.

It’s a logical bet as Australia’s compulsory retirement-savings regime is forecast to double in size to A$5.4 trillion within a decade, and funds allocate more money outside traditional markets like stocks and bonds as they seek higher returns.

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To be sure, competition to manage lucrative long-term capital is fierce, not only from the likes of BlackRock Inc., State Street Corp. and domestic asset managers, but the pension funds themselves.

Firms including AustralianSuper, First State Super and UniSuper are increasingly bringing investment capabilities in-house, rather than farm money out to external managers, as they seek to generate better returns by cutting costs.

Farrell doesn’t see internalization as an issue.

“The products that we offer are specialized enough that it won’t necessarily be the things that they take internally,” Farrell said. “And on top of that, as they internalize and build internal investment teams, they will be even more focused on having partnerships with asset managers that can help them understand the challenges that you face when building those internal capabilities.”

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While there are no immediate plans to ramp up the number of Australian-based staff -- currently about 20 -- Farrell says the firm may add workers incrementally.

“We will hire, but it won’t be a step-change,” she said. “I have, more or less, what it takes here to get to A$20 billion.”

To contact the reporter on this story: Matthew Burgess in Sydney at mburgess46@bloomberg.net

To contact the editors responsible for this story: Edward Johnson at ejohnson28@bloomberg.net, Peter Vercoe, Katrina Nicholas

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