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Ann: AEF Results to 30 June 2017, page-16

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The Snow Angel

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04/09/17

17:14

Post #: 26986479
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Originally posted by Cp dog ↑

Bad logic. Fee reductions can be made almost regardless of fund size. The capacity to reduce fees really comes from the growth in funds ie growth in revenue. If these funds are growing, then cuts to fees can be made to compensate for increased revenue. It's a great position to be in if funds are expanding. If FUM are growing at 30% p.a. then one could decide to cut fees by 10% and still have increasing revenues.
Look at a larger fund manager like perpetual. At one stage they had $40+ billion under management, now its $31 Billion. Now that's a 25% drop in revenue. Very tough to drop fees on top of that. IOOF on the other hand has more FUM and is growing it at a good clip. So there may be some capacity to drop fees at IOOF.
Well, AEF are growing their FUM at a faster rate than anyone else and all that matters to me is % increase in growth. It gets harder to get the same % growth as fund size increases. I tend to steer away from the top companies because mathematically it gets harder to grow at solid rates when you are nearly dominating to market..... there is a finite end to growth when you dominate the 'fish pond'.

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My point is that the larger the FUM the bigger the impact on profit from any fee reduction ie if FUM is $1bn and fees are reduced by 10bps that a $1m impact, if you are at $2bn FUM thats a $2m impact. Agree that you can offset the fee reduction with FUM growth however that just leaves you with flat profit. There's plenty of confusion on Super fees at the moment so that may give AEF a breather on further fee reductions.

AEF Price at posting: $115.67 Sentiment: Sell Disclosure: Not Held
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Ann: AEF Results to 30 June 2017, page-16

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Ann: AEF Results to 30 June 2017, page-16

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