Most Australians through their superannuation are invested in a multi-manager product. Table 1 shows the break up of the Australian superannuation industry at March 2007 and our estimates of the percentage of monies invested in multi-manager products. We estimate that about 80% of Australians’ superannuation monies (excluding those in small funds and annuities) are invested in multi-manager products. In terms of numbers of Australians, the percentage would be greater due to the number of multiple accounts Australians hold, particularly in industry funds.

All of Australia’s leading institutions (and their aligned financial planning businesses) now offer multi-manager products. Table 2 shows the progression of institutions offering these products since MLC launched its initial products in 1986.

The majority of multi-manager products (both super and non-super) are supported by advice/research from a relatively small number of asset consultants. Some of these consultants also offer multi-manager products in their own right (often referred to as implemented consulting products). Three Australian states have set up separate investment organisations to manage the state’s superannuation monies – Queensland (QIC), Victoria (VCFM) and South Australia (Funds SA). TCorp manages non-superannuation monies in NSW.

Table 3 lists the main consulting firms/investment organisations operating in Australia and their funds under advice/management at March 2007. With the exception of van Eyk, the consultants’ advisory clients are wholesale in nature. van Eyk’s advisory clients are mainly retail.

At Chant West, assessing multi-manager products is a core element of our business. When we assess superannuation funds, 40% of the assessment is based on the multi-manager options offered. In assessing these products, we are primarily interested in the quality (structure) of:

• The underlying asset consultant’s resources
• Any internal investment resources
• The fund’s governance regime
• The investment portfolios

Investment beliefs and processes, and the quality and integrity of the people involved, are far more important to us than past performance. In fact, past performance counts for only about 4% of our overall assessment. In essence, what we are assessing is the fund’s ability to select superior fund managers and their ability to combine those managers into portfolios that are likely to achieve their stated risk/return objectives.

Assessing the quality of the underlying (primary) asset consultant is a key component of our assessment of a multi-manager product. Much of the information we have on consultants comes from regularly managing tenders for asset consultants and implemented consultants. We research them in much the same way that they research fund managers. Our database of information on consultants is similar to theirs on fund managers. And just as they have clients who have invested with fund managers, we have clients who have engaged/invested with consultants, and similarly we monitor their performance on a regular basis.

In November 2006, we also began to rate multi-manager products. We currently rate 12 product providers, which include the products/options of industry funds, institutions and implemented consultants. Through these ratings, we cover most of the asset consultants listed inTable 3.

Our ratings of multi-manager products take into account three main criteria: organisational strengths (20%), manager and capital markets research (40%) and portfolio management (40%). We determine a score for each of these criteria and then weight them to provide an overall rating. For each of the main criteria, we have a further sub-set of detailed criteria. Table 4 summarises the criteria we use.