A rapidly growing Australian pension fund system and the potential of Asian investment markets are attracting some of the biggest American fund managers to Australia.
Among those making recent moves to establish or expand existing offices include market leaders Fidelity Investments, Boston; Vanguard Group, Valley Forge, Pa.; and MFS Asset Management Inc., Boston.
Fidelity is moving to establish a Sydney office headed by Richard Darke, who previously served the Australian market through a Hong Kong office.
Fidelity first came to Australia with retail mutual funds about 1986, but made no real impact and in 1994 sold its retail funds to major Sydney-based manager, Perpetual Funds Management.
Fidelity's latest thrust will be into wholesale fund management, which is dominated by the Superannuation Guarantee Charge SGC, the government's mandated pension system for all wage earners.
With employee and government contributions set to take total contributions to 15% of wages by early in the 21st century, the current A$200 billion (U.S.$150 billion) of pension funds assets is forecast to rise to A$2 trillion (U.S.$1.5 trillion) by 2020.
Fidelity's rival, Vanguard, is setting up an office in Melbourne headed by Jeremy Duffield. Mr. Duffield said Vanguard is planning to use the move to access Asia's rapidly growing investment market as well as to take advantage of the asset flow into pension funds.
MFS Asset Management, which already has an office in Sydney, is reported to be negotiating the purchase of Armstrong Jones Investment Management from its parent Pacific Mutual of Sydney.
MFS now has about A$200 million (U.S.$150 million) under management, but the acquisition of Armstrong Jones would lift this to more than A$2 billion (U.S. $1.5 billion) and give MFS access to the retail market via Armstrong Jones' established property mutual funds.
Alliance Capital Management, New York, also is believed to be looking to integrate its operations with National Mutual Funds Management, Melbourne. Like Alliance, National Mutual is a member of the AXA group of Paris.
Another global manager, WorldInvest Ltd., London, has formed a local subsidiary and hired its former local agent, David Price, to run its existing wholesale pension fund pooled funds.
There also is talk of interest by Wellington Management Co., Boston, and PNC Bank Group, Pittsburgh, is believed to be looking at the Australian market.
There already are more than 50 well-established fund managers battling for a share of A$300 billion (U.S.$225 billion) of retail and wholesale investment funds under management.
The 10 largest managers have more than 57% of the market and the top 20 managers control an estimated 75%.
This suggests there is little room for new overseas players unless they can offer a different product or investment skill, said Alan Noble, an analyst with William M. Mercer & Co.
He noted Mercer already monitors dozens of managers that handle global portfolios for Australian pension funds. These include Alliance; Brinson Partners, Chicago; Smith Barney Capital Management, New York; State Street Bank and Trust, Boston; Fidelity; Loomis, Sayles & Co., Boston; and Merrill Lynch Asset Management, Plainsboro, N.J.
Nor is there any shortage of fund managers operating in Asia from Hong Kong. Several have admitted privately their Australian offices are "insurance" in case the mood in Hong Kong changes after 1997.