Fund managers warned on risks

The Australian Securities and Investments Commission has also narrowed-in on key-man risk, where the loss of one or two star fund managers could trigger an outflow of funds or affect investment returns.

The findings were contained in a review of the adequacy of risk management systems of fund managers that help oversee Australia's $1.3 trillion retirement savings. It covered some of the biggest fund managers, including those owned by banks, through to boutique operations.

ASIC commissioner Greg Tanzer said that while fund managers generally had adequate risk management systems, there was scope for improvement, particularly among the managers that weren't part of a bank or a large life insurer.

Investment managers also relied too much on external compliance and risk management consultants without necessarily having the skills to independently assess the quality of their services, the ASIC review found.