After a year in which almost 90 percent of its funds and mandates beat their benchmarks, IFM Investors, an investment company owned by 27 Australian pension funds, rebated 7.5 percent of fees back to clients.
The asset manager also did not pay its dividend to its Australian superannuation fund owners and put aside millions in a ‘rainy day’ fund to prepare for a potential market downturn. The rebate is the direct result of IFM’s ownership structure, said Julio Garcia, head of infrastructure for North America.
“We took advantage of great financial results over the last couple of years to make the rebate,” he said in an interview. Garcia said IFM, which manages $84 billion and has 337 global institutional clients, has rebated fees before and has also reduced fees as its funds have grown.
IFM’s rainy day fund is meant to serve as a hedge against a future downturn. “The economy has been strong and we invest in defensive asset classes,” Garcia said. “But the markets are getting volatile and if there’s a downturn in the industry, we want to make sure we’re very well positioned.”
Garcia said IFM’s cautious approach to the market allowed it to expand during the financial crisis, when competitors were retrenching. IFM opened its New York office at the time and hired new staff. “We had good growth in that time,” Garcia said.
At a recent media event, Brett Himbury, chief executive of IFM, said IFM’s structure is unique and can address a chief investment officer’s concerns about fees and trust.
Clients want “a manager that has an alignment with their interests. They’re sick and tired of managers purporting to be acting in the interests of their investors and their members and then seemingly doing things that are inconsistent with that stated intent,” Himbury said. “That said, if you’re a fund manager, there is less money going to less managers at less margins. A lot of our competitors are feeling the pain, and frankly a number of them should. Fund managers need to do a better job of reminding themselves it’s not their money.”