Craig Dunn may be paying the price for AMP’s shares remaining in the doldrums. After all he is just 49 years of age, a year younger than Craig Meller, who will succeed Dunn as chief executive at Australia’s largest insurer and fund manager.
In the last six years, coinciding approximately with Dunn’s tenure at the helm, AMP’s shares have more than halved. During the same period the S&P/ASX Index has fallen 14 per cent. This has come as Australia’s pension market has grown to become the fourth largest in the world. Superannuation assets are now about $1.6 trillion.
Meller hails from the same business that Dunn ran before his elevation to the top. He has been managing director of AMP Financial Services, the business that contributes as much as 90 per cent to AMP’s bottom line, since October 2007. Meller says he is “focusing on driving higher revenues through deeper customer relationships and improved business efficiencies”. Presumably Dunn, like other CEOs, may have tried the same tact.
For AMP and other fund managers, regulatory changes are hurting their products. Instead of being able to offer a plethora of high-margin products, they are increasingly being forced to offer very low-cost products.
Moreover, fund managers seeking to tap into the superannuation market must also offer liquidity to investors who, after the collapse of Lehman Brothers in 2007 sent global markets plunging, were unable to get their money out of funds quickly enough to preserve any capital gains.
This has meant self-managed superannuation funds are now the fastest growing segment of that market. Investors have lost trust with the custodians of their assets following the 2007 meltdown that brought the global economy almost to its knees.
Meller has tough job ahead of him to convince investors to retain their faith in AMP’s funds, increase assets under management and boost the stock price.