Analysis by Rainmaker Information reveals that 17% of APRA-regulated superannuation FUM was internally managed in 2023. This could grow to 43% over the next two decades, according to research published in latest Superannuation Benchmarking Report.
The analysis underscores that larger super funds are more likely to adopt internal investment management.
As market concentration among super funds increases, the influence of these larger funds predisposes the market to internal management intensifying.
Reinforcing this, the analysis also showed that the biggest five super funds in 2023 accounted for 50% of the market, the biggest 10 accounted for 75%, and the biggest 20 accounted for 95%.
This is significant because superfunds managing over $100 billion currently manage 31% of their FUM internally, surpassing the internal management proportion for funds in the $50-100 billion range by one-and-a-half times.
Not-for-profit (NFP) super funds meanwhile displayed a higher inclination towards internal management, with 23% of their FUM being managed internally.
NFP super funds are also poised to grow their market share from the current 72% to an anticipated 85% by 2043.
“Rainmaker Information projects only 15% of institutional superannuation FUM will be held within retail superfunds by 2043, which will drive one-third of all FUM into internal investment management,” said Alex Dunnin, executive director of research and compliance at Rainmaker Information.
“This shift will transform Australia's investment management landscape,” he said.”
“With super funds internally managing larger portions of their multi-trillion-dollar investment portfolios, more FUM will become 'uncontestable' for investment managers. While this will challenge the business models of many investment managers, it will create opportunities for others.”
The key players internalising their investment management include UniSuper, AustralianSuper, Aware Super, Australian Retirement Trust and Cbus.
“Among private sector NFP superfunds, internal investment management is a prevalent practice, while public sector NFP super funds exhibit minimal engagement in this strategy,” said Dunnin.
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