IBISWorld Market Research
Increases in compulsory superannuation will threaten the industry.
Melbourne, Australia (PRWEB) July 19, 2014
Investing can be a capricious undertaking. Calm conditions can swiftly give way to manic swings. It only takes a rumour, an announcement or a data release to cause destabilisation. The investment vehicles, mostly trusts, comprising the Financial Asset Investing industry were reminded of the fickle nature of investing in 2007-08 and 2008-09, when revenue tumbled as financial markets turned sour. Over the subsequent years, the markets remained unstable, exhibiting long runs of uncertainty and volatility. Wild upswings and downturns over the past five years resulted in the market trending sideways for the larger part of the period. Industry revenue is forecast to grow at an annualised 1.7% over the five years through 2014-15. In 2014-15 revenue is forecast to grow by 5.3% to reach $9.4 billion. Industry revenue is highly dependent on the value of assets. The value of assets plunged in 2008-09, when global capital markets were in turmoil. Industry revenue plummeted accordingly. Conditions have been improving since then, but the path to recovery has not been straight. Instead, it has been obscured by the ongoing concerns regarding European debt problems and the slow pace of recovery in the US economy. As a result, the industry has not yet regained all the lost ground, with industry assets estimated to be worth $190.1 billion in 2014-15, just under the 2009-10 levels, in constant terms.
The outlook for the industry is more positive, with asset values forecast to increase. This growth will be supported by further increases in sharemarket values, domestically and around the world. IBISWorld industry analyst Andrei Ivanov states “consumers' saving rates are expected to remain high over the next five years, which will bode well for the industry as higher saving rates often lead to higher investment rates.” However, superannuation will become more of a threat for the industry. According to Ivanov, “Increases in compulsory contributions will drive the growing popularity of superannuation funds as a savings and investment substitute.”
The Financial Asset Investing industry's market share concentration can be measured by the value of assets held in particular investment vehicles. Based on this, the industry exhibits a low level of concentration. However, concentration is expected to increase over the coming five years, with the industry following the general trend of consolidation occurring in other finance industries. Consolidation will be driven by the pressures on businesses to reduce costs and achieve efficiencies. This is a direct consequence of the global financial crisis, which caused profit margins to thin out. One way of restoring profit margins to more sustainable levels is through the benefits that economies of scale offer, which can only be achieved through running larger operations.
For more information, visit IBISWorld’s Financial Asset Investing report in Australia industry page.
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IBISWorld industry Report Key Topics
This industry comprises trusts (except trusts of separately constituted superannuation funds) that are primarily engaged in investing money on their own account in predominantly financial assets, including mortgages. The industry also includes investment-type unit trusts engaged in holding financial assets. The funds of unlisted and listed property unit trusts are excluded from the industry.
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