To assess the state of the Australian equity markets, Collins Consulting Group engaged independent research specialists, Kitsune Consulting. The research focused on prospects for new entrants and assessed hiring strategies. 22 in-depth interviews were conducted in June 2010 with senior decision makers from investment banks, fund managers and broking firms. From this, we have developed a better understanding of current market conditions and, combined with our expertise in the sector, can make some recommendations.

Current Market Conditions

The Australian equity markets may superficially appear to be ripe for new entrants. Australia is a relatively strongly developed economy and it has a large government-mandated pension pool. However, it is very crowded and competition is fierce. Many attempts have been made to break into the market with varying degrees of success. Fund managers interviewed universally regarded the prospects for new entrants as extremely limited. They commented that it would be very tough to break in without a significant point of difference, and they felt that in such a saturated market any content or service gaps are quickly closed. Fund managers commented that the level of investment required, both in time and resources, would need to be significant and sustained over at least a five year period to establish trust and win market share.

Fund managers are well aware of their power in the market and are using it. They are driving new deal structures, such as tripartite deals between fund managers, boutique research providers and large corporate broking houses. This is making an already difficult market even tougher for lower ranked players. Other points of interest are:

Panel appointments are not the only means of establishing broker/fund manager relationships, and their prevalence may be diminishing.

Some aspects of the broking function are increasingly becoming commoditised and some fund managers look to the day when they can avoid dealing through brokers altogether.

Fund managers are driving new deal structures that have limited upside for brokers.


Prospective entrants to the Australian market must give careful consideration to the competitive landscape and make a realistic appraisal of likely levels of investment required for their entry strategy.

Poorly planned and executed entry strategies are difficult to recover from. Some recent entries to the market have been perceived as naïve and ill considered. These have done considerable, possibly irreparable, brand damage locally.

What might contribute to a successful entry?

Unfortunately, very few fund managers made any positive comments about entries to the market that they have observed. However, from analysing their criticisms, some positive recommendations can be made.

Strategy, Investment and Pace

Many fund managers stressed the need to make a clear choice between a full service or a niche offering. It was felt that some recent entrants, while purporting to have a specialty focus, were in fact engaged in a half-hearted attempt to establish a full service house. There was also a negative perception of some past attempts to break into the market, with some organisations described as fickle – having a history of attempting market entry in growth cycles and withdrawing in downturns. While there is clearly some business logic to this, it has been hugely detrimental to the trust and engagement of the fund managers. Incremental development efforts, demonstrating a long-term commitment to local investment and establishment of a quality offering received more positive comment than alternative approaches.


Recent entries to the market have been underwhelming and there is a high degree of scepticism about the prospects for their success.

New entrants must have a clear strategy and/or point of difference to enter successfully. In particular, a clear choice between “full service” and “niche” style offerings need to be made, with associated levels of investment.

A niche strategy would have to be extensively and clearly communicated to the market and backed up with a clear ability to deliver quality results.

New entrants may need to be prepared to invest significantly for several years before realising any return, and to ride out market turbulence without withdrawing.

The People Factor

The hiring strategies of many recent new entrants – involving large-scale hiring drives with huge sign-on packages – were roundly criticised and seen as unlikely to assist in establishing a long-term presence.

Fund managers commented that some new entrants have ‘picked up one star’ at an exorbitant price and then surrounded that person with second-rate hires. A single “big name” was generally thought not sufficient to draw fund managers’ business across to a new player. When fund managers considered the relative importance of talented individuals, the whole was generally considered to be greater than the sum of the parts – that is, a cohesive team with reasonable levels of talent across the board was a better prospect than a team with one outstanding individual and not much else.

Slow, considered approaches to hiring were generally considered much more promising than “big splashes”. This was in part because the working pool of genuine talent was perceived to be very small; and therefore, the proportion of it that might be available at any given time was extremely limited. Large hiring drives were generally perceived to result in the stacking of desks with second- or third-rate talent.

In analysing changes to perceived rankings of established players, the importance of a cohesive, high quality team became apparent. Fund managers felt that drops in performance on all attributes of the broker/fund manager relationship often correlated closely with periods of upheaval, particularly in the research teams, and the ability to maintain relatively cohesive teams was seen as a key strength of top players such as UBS and GSJBW.


A functional, cohesive, quality team is more important to the fund managers than one or two stand out individuals (although having those people obviously helps). One strategy might therefore be to purchase an existing business that includes an established, well-respected and cohesive research team. A new entrant can then focus on gaining leverage from that team by backing their offering with a global structure and its associated benefits.

Quality research is the primary attribute fund managers consider important. Other significant attributes include corporate flows and execution, contacts and corporate access. No one attribute is definitive and the ideal mix varies according to the fund managers’ business model. That said, several business structures among successful boutiques involve essentially outsourcing all but the analysis.

Local weaknesses and skills gaps include capacity for cross-silo research and analysis (eg across asset classes or sectors), creativity, insight, and depth of research, as well as a willingness to provide services directly tailored to the fund managers’ needs and business models.

To obtain a full copy of this research paper, or to discuss the findings in more detail, please contact:

Sharon Mackie


Direct:  +61 29235 9806

A recent Goldman Sachs report suggests that Australia would be $180m better off by closing the gap between female and male participation, and yet progress remains painfully slow.  Collins has invested over 100 hours in researching the current representation of female employees in the Global Investment Banks and Domestic Institutional Banks in Australia and how well these companies are implementing practices and policies regarding hiring, career development, and work-life balance which aim to reduce gender inequality.  Most conversations lasted around 30 minutes, and with over 100 hours of research undertaken during this process, we have amassed a significant insight into, not only the numbers, but the sentiment around the issues.  In total, we have spoken to well over 70 senior women in our market, representing around 30% of the less than 10% who currently work in front line, revenue generating roles in Australia.  Our network, tenure in the markets, skill at engaging them, and our guarantee of confidentiality, has allowed us to have frank conversations of a qualitative nature with senior women about the key obstacles they face.  From these conversations, we have been able to analyse the recurring themes around what works and what doesn’t in overcoming these obstacles.

The women we have spoken to have worked hard within the existing system to get where they are.  In the majority of cases, these are not conversations they would be prepared to have with their managers or HR, lest they appear to be the squeaky wheel.  They seek not to espouse a ‘cause’, but are often frustrated where any formation as a gender-specific group is met with raised eyebrows by their male colleagues.  Against this background, the opportunity to speak on a no-names basis was one that was almost universally taken up, and all but one contributor (who felt that she would never recommend a woman embark on a role in the dealing room based on her own experience) was keen to hear feedback at the end of the process.

The survey contained a range of questions proposed in a more informal way, and covered six relevant themes: representation, work-life balance, mentorship and training, barriers to leadership, initiatives that are seen to work, and perception of where their organisation sat in relation to its competitors.  All information was gathered on the basis of anonymity in order to increase participation.