Australian fund rebates fees to send ‘clear message’ on greed, says investment group

Australian banknotes are arranged for a photograph in Sydney. (Bloomberg pic)

SYDNEY: An Australian non-profit fund said on Tuesday it will return millions of dollars in fees to investors globally to differentiate itself from for-profit rivals, as the country’s financial sector reels from revelations of misconduct.

IFM Investors, Australia’s second-biggest infrastructure investor, said it had higher earnings than expected in the year to June 30 and would return fees to keep its profit margin below 25%.

“We want to send a very clear message to our investors, and indeed, our competitors, we are determined to set world-class standards that genuinely put investors first,” IFM Chief Executive Brett Himbury said in a statement.

The infrastructure-centric fund manages about A$107 billion (RM320 billion) for 312 institutional investors in 19 countries, including sovereign wealth funds, endowment funds and insurers.

The rebate, equivalent to 7.5% of all investment management fees paid over the past 12 months, amounted to tens of millions of dollars, Himbury added without giving a specific amount.

An ongoing quasi-judicial inquiry into Australia’s financial sector has found that some firms managing funds within the country’s A$2.6 trillion pension system may not be putting customers’ interests ahead of their own.

The Royal Commission last month criticised pension funds run by two of Australia’s largest banks, National Australia Bank and Commonwealth Bank, for regulatory breaches including overcharging customers.

The commission’s final report due next year could recommend major changes to Australia’s financial regulations to ensure the country’s compulsory pension system is properly managed for the benefit of savers.

While industry funds like IFM face criticism for having union representatives without investment experience on their boards, their lower fees mean they often produce better returns for customers over the long term than so-called retail funds owned by large firms.

“A lot of (asset managers) … are outperforming financially, but they are not necessarily outperforming for their members,” Himbury told reporters.

“That sort of behaviour needs to stop for the benefit of the people whose money it is.”

IFM is owned by 27 large pension funds.