BMO takes on tough Australian asset managers

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After investing heavily in a manufacturing arm that creates mutual and exchange-traded funds, Bank of Montreal is on the hunt for institutional investors. That has set management's eyes on Australia.

BMO has already spent a lot of money in the Asia-Pacific region, with sales teams in places like Hong Kong and mainland China, but Australia has so far eluded the bank. To cross the country off its to-do list, BMO announced Tuesday that it hired the former head of BlackRock's Australian institutional sales to head its new office Down Under.

BMO already has a smattering of Australian clients, but the bank's been flying relationship managers in and out of the country. The new hire allows it to start building a committed team within Australia's borders. "It's very important for us… to have presence on the ground in each region where we intend to grow," said Barry McInerney, BMO's co-head of global asset management.

That mindset has pushed the bank to invest in a number of different locations over the past few years, establishing an office in Abu Dhabi in 2012 and buying Hong Kong's Lloyd George Management in 2011.

But in Australia, the bank is entering a market that already has intense competition. The country is appealing to asset managers because the government implemented superannuation, a fancy term for mandated pension contributions. Think of it as something that goes above and beyond the Canada Pension Plan, forcing employees and employers to save a sizable chunk of their paycheques for retirement.

Because of this rule, the market has already been inundated with asset managers, such as BlackRock and some solid local firms. However, BMO's realistic about its entry. "The Australian investment marketplace is highly competitive. We know that. But we're in it for the long-term., " Mr. McInerney said. "It takes a little time… just to build your presence."

Critics may argue that this isn't the best time to enter Australia because its resource-driven economy is so closely tied to China's economic prospects, but Mr. McInerney believes the mandated savings program alters the way people save.

"Irrespective of the market cycle, the retirement system in Australia, the superannuation system, requires all employees to participate," he said. Unlike Canadians, who can pull back on their savings if they want, Australians can't.

And because there's always a growing pool of retirement money to manage, Australian institutional clients are always looking for new funds to invest in.

(Tim Kiladze is a Globe and Mail Reporter.)

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