There is considerable diversity in the investment vehicles and products offered to the industry’s varied customer base. The investment vehicles include listed and unlisted public unit trusts (offered by fund managers), listed investment companies, common funds (offered by trustee companies), cash management trusts (offered by banks and other financial institutions) and friendly society products.
Trusts comprise over 90% of the assets of the financial asset investors industry. The most popular form of trust adopted is an equity trust, followed by a cash management trust. Trusts such as these are predominantly established by promoters (usually banks and fund managers) that also tend to be the administrators. Promoters receive a management fee from the trust to manage funds and receive reimbursement for costs incurred. Some of these trusts are listed on the ASX, while others have unit prices calculated by the manager of the trust. Equities are the largest asset class held by unit trusts, accounting for an estimated 69.1% of industry assets.
Macquarie Group Limited accounts for 5.5% of market share, other major players in the industry are trusts or companies that have a large number of unit holders or shareholders that pool funds together for investment purposes.
Financial asset investors can expect to encounter an investment climate characterised by unspectacular sharemarket growth, creeping interest rates and gradually improving corporate profit for much of the coming five years. Industry assets are forecast to grow by 11.4% per annum. As the industry’s capital base grows, IBISWorld expects investments to perform better than they did during the past five years, with the operating environment expected to become less volatile and more predictable. These factors will contribute to industry revenue growing at an annualised 6.7% over the next five years to total $13.9 billion in 2017-18.
This growth rate masks the risk of large year-on-year increases and declines. Revenue is generally highly volatile because it reflects returns on assets – both capital movements and yields. Asset growth and the returns generated are both highly sensitive to the performance of investments and the sharemarket, interest rates and the state of the economy. Any unforeseen events that may occur over the coming five years would therefore have a material effect on IBISWorld’s forecast.
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