While U.S. fund managers and investment services groups continue to look over the Australian market, a major U.S. banker has expressed doubts on their likely success.
Marshall Carter, chairman and chief executive officer of State Street Boston Corp., in Australia to celebrate the bank's 10 years in the custody business in that country, says local Australian managers are still in a strong position.
Based on the experience of U.S. institutions moving into Europe and Canada, "I don't think you can draw the conclusion that they will completely eliminate the locals," Mr. Carter said.
He said U.S. managers made the mistake of bringing in large contingents of Americans and did not always tailor investment products to suit overseas markets.
American companies might need to seek a niche in the market because the total Australian market still consists of only about 18 million people.
Norton Reamer, president of United Asset Management Corp., Boston, recently made his first trip to Australia to attend a conference organized by the Australian Investment Managers' Association and took the opportunity to look at potential acquisition targets. Like other U.S. groups, UAM probably will look at Commonwealth Funds Management, now owned by the federal government. Commonwealth Funds manages A$7.8 billion (U.S. $9.83 billion), largely for the two major federal government public servants' funds.
In addition, the New South Wales state government is considering the privatization and possible sale of the State Superannuation Corp., which has A$17 billion (U.S. $21.4 billion) under management and is the fifth largest manager in Australia.
There has been no shortage of new managers and service providers arriving in Australia, led by mutual fund giant Fidelity Investments, Boston, which quickly launched several specialized international funds.
Richard Darke, managing director of Fidelity Australia Ltd., Sydney, said the group in its first two months of operation has taken in more than A$40 million (U.S. $50.4 million) of institutional business from pension funds and through subadvisory contracts with other domestic fund managers.
Mr. Darke said he is confident there's a niche in the Australian market for a major manager to act as a subcontractor for offshore investment by domestic managers.
Another U.S. manager to open its doors in Australia, Scudder, Stevens & Clark, New York, has developed a niche marketing strategy that includes an environmental "overlay" on investment selection.
Other managers to open in Australia have included Grantham, Mayo, Van Otterloo & Co., Boston, via GMO Australia, Sydney, which was established last year.
Last month, Massachusetts Financial Services Group, Boston, joined with United Funds Management, Sydney, to launch a lower-cost trust (a mutual fund offering multimanager choice).
And State Street, although it holds more than 50% of the master custody market in Australia, might get more international competition.
Apart from Chase Manhattan, New York, which has 20% of the market, there are reports of Mellon Bank Corp., Pittsburgh, looking at the Australian market. Mellon also owns the Dreyfus Corp., New York, a major U.S. mutual fund group.