BT Investment Management’s multi-boutique model combines the benefits of specialised investment teams with the operating scale and distribution reach of a larger business. The key features of the model are:
focused business units; remuneration linked to performance; centralised, scalable support functions; and strong collaboration between teams as the success of one contributes to the profitability of another.

Dirk Morris
Chief Executive Officer

Multi-boutique structure

Out of the separation and listing of BT Investment Management, we have been able to develop an operational structure which gives us the best of both worlds. We have the ability to attract, retain and motivate talented fund managers by providing them with an operating environment and culture that resembles a boutique structure. At the same time, we provide those fund managers and our clients with the stability and security of a larger institution.

We retain close links to Westpac that assist us in accessing a powerful distribution platform. Our multi-boutique approach is a significant source of our competitive advantage, providing a superior and more agile platform than traditional models and greater stability, security and diversity than the stand-alone boutiques. In addition, our long-established reputation for quality cannot be underestimated and is reflected in BT Investment Management again winning several industry awards.

Talent retention

We have been successful in attracting and retaining talent with the new model. Our market-leading Equity Strategies team has fully embraced the new structure and we have recruited two boutique leaders with global experience along with other senior investment professionals.

Culture

The cultural change which has taken place at BT Investment Management has been significant. The boutique managers and their teams are now part equity owners of our business and are aligned with our clients’ interests to deliver strong performance and with our external shareholders’ interests to grow revenue and contain costs.

Market conditions

The markets have, I believe, been the most volatile we have seen in 20 years. The funds management industry has found these conditions very difficult and BT Investment Management has not been immune. Over the past three months, the severity of the global financial shock has begun to impact even the stronger economies such as Australia. However, we believe the coordinated global policy response will succeed in preventing a long-term depression and that equity and credit markets will stabilise in the coming year.

Year in review

Our profit performance this year has been good in these challenging market conditions. In absolute terms, our cash NPAT is in the middle of the range we forecasted in February this year, despite a further downturn in Australian equity markets from that time. In relative terms, our cash NPAT has grown 10% on last year.

We have seen $1.7 billion of positive net flows in our institutional and wholesale funds under management. These were offset by $1.8 billion in outflows from the run off in the retail legacy book which were anticipated in the Prospectus. Our major domestic equity funds have continued to perform in the top two quartiles for most periods, with our property fund performing especially well this year. Our response to the difficult market conditions included a swift and strong cost control program and our cash cost to income ratio has improved from 65% to 61%.

Product performance

Our superior performance has helped us win five major awards including Standard & Poor’s Fund Manager of the Year. Our investment teams continue to focus on delivering alpha, or excess returns over the benchmark indices, through consistent investment processes and robust risk management. We are reviewing the performance of our international equities funds and credit funds which underperformed during the year due to widespread dislocations in markets.

Outlook

In the short term, continuing adverse market conditions will result in a challenging business environment for us. However, the collective skills and experience of our teams over many years and many economic cycles will enable us to properly balance risk and returns in managing our clients’ investments. Having cut costs over the past 12 months, we are reluctant to overreact to near-term volatility and remain focused on executing our long-term growth strategy.

We also have distinct advantages which will provide many opportunities going forward: including our unique and flexible structure, our strong, unleveraged balance sheet, and our approach to product development. The dislocation and volatility in the markets may also provide opportunities to attract new talent and for further diversification and differentiation of our products to meet client needs.

Dirk Morris
Chief Executive Officer

Dirk Morris