MENU

Are banks at risk from the ASX Ltd’s mFunds?

While many investors prefer to manage their own portfolio and invest directly in listed shares, thanks largely to compulsory superannuation, the majority of Australians’ savings are invested via managed funds.

It’s a complicated field and again while some direct investment with fund managers does occur, the majority of superannuation investors are more likely to visit a financial planner and end up investing via a platform, wrap or masterfund. These options are essentially vehicles to simplify the process of investing in managed funds, with the major service providers of these vehicles including Macquarie Group Ltd (ASX: MQG), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), IOOF Holdings Limited (ASX: IFL) and BT Investment Management Ltd (ASX: BTT), which is affiliated with Westpac Banking Corp (ASX: WBC).

With the major banks owning most of the major platforms, the compulsory super system has provided a huge tailwind for growth. This growth looks set to come under pressure due to a soon to be released product by the ASX Ltd (ASX: ASX).

The ASX is due to launch its ‘mFund Settlement Service’ in the coming months. mFunds will offer a fund manager and investor the ability to create and redeem units in a managed fund. It will operate in a similar way to buying or selling shares on market through a broker, however the transaction doesn’t take place between two investors (i.e. a bid and ask) but rather between the managed fund and an investor.

Foolish takeaway

Time will tell how successful mFunds proves to be. It is perhaps unlikely that there will be a major draw-down of funds from platforms onto mFunds, however savers and their financial planners looking to invest in managed funds may be more likely to do so via mFunds rather than traditional platforms in the future. This could significantly slow the growth of platforms and ultimately lead to a decline in funds on platforms. The banks will no doubt be watching developments closely and with at least a mild degree of concern.

Attention bank shareholders!

Fact: Australia's large banks had an incredible run in 2013. But some top analysts are saying the trend could stop dead! Get the inside scoop in The Motley Fool's brand-new FREE investment report, "What Every Bank Shareholder MUST Know."

 

Motley Fool contributor Tim McArthur owns shares in BT Investment Management Ltd and Macquarie Group Ltd.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.