Global funds giant abrdn retreats from Australian equities management

SG Hiscock has secured the investment management of abrdn’s Australian equities business, as the domestic funds sector traverses a challenging period and a broad shake-up.

SG Hiscock has secured the investment management of abrdn’s Australian equities business, as the domestic funds sector traverses a challenging period and endures a broad shake-up.

After fielding questions from The Australian, the parties on Tuesday confirmed they had entered into a “strategic partnership” that would see global giant abrdn transfer its local Australian equities business to boutique firm SG Hiscock.

SG Hiscock, has offices in Melbourne and Sydney, and is led by executive chairman and chief investment officer Stephen Hiscock. It is a high-conviction active funds manager which in 2019 merged with DMP Asset Management.

The latest strategic move signals a retreat by abrdn – which had £386.3bn in its investment management unit globally as at June 30 – from active internal equities management in Australia. The company – formerly called Standard Life Aberdeen – has about 700 investment specialists in more than 30 locations worldwide.

Under the partnership agreement, SG Hiscock becomes abrdn’s wholesale distribution partner in Australia, while the transition of the domestic equities business is expected to be completed in the first half of 2023. While abrdn doesn’t disclose how much it manages in Australia, three of its domestic funds manage about $400m.

That doesn’t include other Australian-dollar denominated funds that invest in areas including emerging markets.

Asset consulting firm Zenith informed investors on Tuesday of the abrdn and SG Hiscock partnership and personnel changes.

“SGH will assume responsibility for the local distribution of abrdn’s existing range of strategies encompassing international shares, multi-asset, absolute return and emerging market debt (subject to due diligence),” Zenith said.

“Coinciding with the announcement, Michelle Lopez, head of Australian equities, has departed the business, with her oversight and leadership responsibilities assigned to Natalie Tam, deputy head of Australian equities.”

An abrdn Australia spokesman said: “The partnership with SGH will help drive efficient, client-led, sustainable growth while maintaining a world-class offering for Australian investors.”

He noted abrdn would continue to employ a number of local staff in global and Asia Pacific regional roles and said it remained “strongly committed” to Australian investors. The firm will continue to provide products including managed accounts, active exchange-traded funds, sustainable investment strategies and digital advice to local investors.

The move by abrdn comes as domestic and global fund managers grapple with volatile market conditions, a shift to passive funds and pressure on fees. The local industry is seeing a round of consolidation at the larger end as Perpetual and Pendal move forward with a merger, while Regal Funds Management in June completed a takeover of VGI Partners.

Paradice Investment Management sold a 50 per cent stake in itself to Charter Hall.

Global groups have also been pulling back from direct investment management in Australia in the past six years. In 2016, Goldman Sachs Asset Management’s Australian investment operations rebranded as Yarra Capital following a management buyout, and it has since taken oversight of part of UBS Asset Management’s local business.

Last year, Yarra Capital and global funds management group Nikko Asset Management entered into a binding agreement which saw the former buy Nikko’s Australian business. The transaction saw Nikko take a 20 per cent in local manager and gain board representation.

Zenith said the move by abrdn was a “major strategic shift” as the firm changed from having a dedicated Australian office with internal funds management to a third-party distribution model.

The change saw Zenith put 13 abrdn fund’s “under review” on Tuesday.

“The departure of Lopez, although unrelated to the SGH announcement, represents a material diminution of abrdn’s Australian portfolio management capabilities, highlighting her contribution to the investment process and respective track records of the underlying funds,” Zenith said.

“When the combined structure is finalised and there is clarity on the integrated process, Zenith will finalise its qualitative position.

“In terms of the offshore-managed strategies, including international shares, multi-asset, alternatives and emerging market debt, Zenith has placed these funds ‘under review’, while we determine SGH’s longer-term commitment to offering these strategies to the wholesale market. A number of these funds lack funds under management scale and may not fit with SGH’s broader distribution strategy.”

Among the 13 funds under review, is abrdn’s Sustainable Emerging Opportunities Fund. It is an Australian-dollar fund that manages about $323.4m and seeks exposure to emerging stock markets or companies with notable activities in emerging markets.