Benchmarking: A Critical Tool for Australian Asset Owners and Asset Managers

Benchmarking: A Critical Tool for Australian Asset Owners and Managers

In an era of global competition and evolving regulatory standards, Australian asset owners and managers are under increasing pressure to achieve greater operational efficiency, especially across their middle- and back-office functions. As local products are frequently benchmarked against globally manufactured alternatives, which benefit from economies of scale and streamlined structures, such as the master UCITS framework, Australian firms face critical decisions around cost competitiveness and service delivery.

For asset owners, the drive toward diversified portfolios—especially in private markets—necessitates global service models capable of delivering complex, multi-regional support. Providers are now leveraging multiple service centers to deliver these essential activities with greater efficiency and precision. In this dynamic landscape, comprehensive and continuous benchmarking is not just a cost-saving measure; it is essential to maintaining a strategic edge.

To navigate this complex environment, it is crucial to engage in regular and comprehensive benchmarking across key functions. A purely local perspective is no longer sufficient. By leveraging both global and local benchmarks, asset managers and owners can position themselves to meet regulatory expectations, align with industry best practices, and stay agile in an increasingly interdependent market.

Why Benchmarking is Essential for Australian Firms

Australia’s asset management and super fund industries have recently experienced significant consolidation. Consequently, Australian asset managers and owners are now facing increased fee margin pressure. Through benchmarking, they can:

• Achieve Cost Efficiency: By identifying cost discrepancies and opportunities for savings, asset managers can renegotiate contracts or seek alternative providers to ensure they are receiving competitive pricing without sacrificing quality.
• Enhance Service Quality and Capabilities: Benchmarking provides insights into the relative performance of service providers, allowing asset managers to assess whether their current partners can meet evolving business needs or if new partnerships should be pursued.
• Strengthen Outsourcing Relationships: Regular benchmarking of outsourcing relationships ensures organizations remain aligned with strategic objectives, fostering stronger partnerships and driving continuous improvement in service delivery.
• Support Regulatory Compliance and Governance: Benchmarking helps asset managers and owners demonstrate to regulators that they are adhering to industry standards and best practices, particularly in functions such as Custody, Trustee/Depositary, and Compliance Oversight.

Alpha’s Typical Benchmarking Assignments

Benchmarking empowers clients to identify improvement opportunities, achieve cost efficiencies, enhance service quality, and bolster market positioning. Alpha FMC specializes in three key areas of benchmarking assignments.

1. RFP Benchmarking – Commercials

Request for Proposal (RFP) benchmarking equips asset managers with a comparative analysis of commercial terms across service providers. Amid growing fee pressures and regulatory scrutiny, securing optimal value for services is crucial. This process compares cost structures, service levels, and contractual terms, enabling asset managers and owners to negotiate competitive deals without compromising service quality.

2. Outsourcing Relationship Benchmarking

Outsourcing relationships evolve rapidly due to shifting business models, market dynamics, and regulatory requirements. Benchmarking these relationships offers insights in the following key areas:

• Cost Benchmarking: Provides a detailed comparison of service provider fees, resource utilization, and total cost of ownership against market norms.
• FTE Benchmarking: Evaluates Full-Time Equivalent (FTE) resource allocation, offering insights into operational efficiency and workforce optimization opportunities.
• Service Quality Benchmarking: Assesses vendor performance based on key metrics like accuracy, timeliness, and client satisfaction, ensuring adherence to industry standards.
• Service Capability Benchmarking: Reviews the innovation and capabilities of service providers, ensuring alignment with strategic goals and growth objectives.

3. Investment Operations – Operating Model

Operating model reviews within investment operations analyze both cost and service components of an asset manager’s or owner’s operating framework. These studies facilitate cost reductions, outsourcing cost estimation for in-house functions, M&A integrations, and economies of scale recognition.

Why Choose Alpha FMC?

As the global leader in outsourcing benchmarking, Alpha FMC provides unparalleled data-driven insights and expertise to deliver optimal insights for clients.

• Comprehensive Outsourcing Benchmarking: We offer in-depth middle- and back-office service analysis, rate card reviews, and cost assessments to help clients secure the best commercial deals and most suitable service providers.
• Extensive Data Library: Our comprehensive database of rate cards spans hundreds of deals across all major geographies and functions including custody, fund accounting and transfer agency. In Australia, our robust dataset enables us to deliver tailored recommendations for core functions.
• Proven Methodology: Our transparent benchmarking methodology takes into account business scale and complexity. By leveraging comparative data from leading providers, we offer comprehensive market insights.
• Expert Team and Global Reach: With 18 years of experience, Alpha has analyzed over 200 rate cards and supported more than 50 asset managers, asset owners, and third-party administrators worldwide in just the past 18 months.

Contact Harry Coombes (Partner, Melbourne) / Mustafa Netterwala (Senior Manager, Sydney) at Alpha FMC today to discover how we can help you benchmark your way to success.