The year that was – the 2018 product round-up

Tuesday 11th December 2018

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It has been a standout year for product launches, despite market wobbles. This year Industry Moves reported on 109 product launches, compared to 95 last year. Listed products, such as exchange traded funds and listed investment companies and trusts, continued to dominate, as fund managers sought to make their capabilities accessible to more investors.

This increase in products is in line with a trend identified by a poll of Australian asset managers earlier this year. During the second quarter of 2018, RBC Investor & Treasury Services received responses from 33 managers to a survey asking them for their views on the opportunities and challenges facing the industry.

It found that more than 60% of managers expected to launch new products in the coming year. The following infographic highlights the breakdown of what kinds of products those managers were expecting to launch.

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The launches we have reported on over the past 12 months broadly back up these predictions. There were 19 launches of exchange traded funds (ETFs) in 2018 (compared to 17 in 2017). Listed investment company or listed investment trusts weren’t as popular as last year, with just 10 launched, compared to 16 in 2017.

At least three new products were launched on the Australian Stock Exchange’s platform for unlisted managed funds – mFund - including the Janus Henderson Global Equity Income Fund.

“By broadening their product range, managers can better service the needs of their existing clients while also attracting new clients to their investment products,” the RBC Investor & Treasury Services asset manager poll said.

We would add to this and say that managers are continuing to launch products that provide more investors with access to their capabilities, and we do not expect the trend of exchange traded fund launches to let up.

A trend that has let up though, has been the launch of social benefit bonds. In 2017 we reported on the launch of four social benefit bonds, however, there have been none that have come into our inboxes this year. We don’t believe that this is any indication that impact, socially responsible (SRI) or environmental, social and governance (ESG) investing is no longer important, rather that fund managers are trying to take these factors on board in all of their product offerings.

In our questions put to managers this year, we often asked them if ESG, or SRI was a factor in their stock selection, and many of them, like River and Mercantile’s chief investment officer equities, partner and portfolio manager, Hugh Sergeant, responded that it was, in some form or another.

And 85% of managers who responded to the RBC Investor Services & Treasury survey, also view ESG factors as important to their investment strategy.

The Hearts & Minds listed investment company, - launched during the year and through which a group of investment experts are sharing their best ideas in order to fund medical research - is a novel approach to ‘feel-good’ investing and a further indication of the future, and possible direction, of SRI/ESG/impact investing. A new exclusively ethical fund manager - Ethical Partners Funds Management – also came to market during the year, with its Ethical Partners Australian Share Fund.

There were a few crypto currency funds, and the World Bank, in conjunction with the Commonwealth Bank of Australia, launched the world's first bond to be created, allocated, transferred and managed through its life cycle using blockchain, or distributed ledger technology. It is called the bond-i blockchain bond .

When it comes to asset classes, Australian equities are still popular – with 12 funds in this asset class launched. There were two Australian agricultural funds, including the Warakirri Diversified Agriculture Fund, and 16 global equity funds of some form, including the BetaShares Global Robotics and Artificial Intelligence ETF. There were four global and four Australian fixed income fund launches, along with three hedge funds, including the Student Impact Investment Fund, a philanthropic student-run fund.

There were also a few bespoke superannuation funds - such as Verve Super for women and Student Super for students. We're in two minds about these specialist types of funds. To help a poorly-serviced section of the market, a niche superannuation fund needs to acutely understand the needs of their members and also be able to provide services to those members at a competitive cost.

Global and local equity markets may have been all over the place – and that may explain the slight pull back in listed investment company launches - but overall fund manager optimism, if measured by the number of product launches, is still relatively high.

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