The Long Goodbye: Why Australian Active Fund Managers Are Running Out of Road

Australian Active Fund Managers are struggling, make no mistake. Hitting home the point yesterday were reports that Ox Capital Management — a boutique emerging markets specialist led by veteran investor Joseph Lai; had entered formal wind-up proceedings on March 27 2026.

This wind up was not the first, and likely won’t be the last. So each time we hear about a fund manager closing, it is easy to read the news as just another casualty of poor performance in a niche asset class. That would be too simple.

Ox Capital’s closure is better understood as a clean illustration of a structural problem that is slowly hollowing out Australia’s active funds management industry. The forces at work are not cyclical. They are permanent.

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3 Reasons Why Australian Active Fund Managers Are Running Out of Road

1. The ETF Juggernaut

The reason investors are fleeing SaaS companies due to AI is because they think it’ll be easier for SaaS clients to just DIY (i.e. build their own software). The DIY trend has been happening in the fund management space (at least in the active space). And this is evident in the the relentless growth of passive investing via exchange-traded funds. Total Australian ETF assets under management are about $300bn, and have been at roughly 40% per annum over the past decade. But the devil is not in that detail, but in this one…passive strategies now hold 83% of total ETF funds under management, with active products accounting for just 5% of the remainder.

The fee differential explains much of this. The average asset-weighted expense ratio for a passive ETF in Australia sits at around 0.24%. For active ETFs, it is 0.73%, and for traditional unlisted active funds, often significantly higher. Research from EY found that two-thirds of all industry ETF inflows in the first quarter of 2025 went into passive funds with an expense ratio of zero to 25 basis points. Active ETFs priced above 100 basis points saw net outflows.

Some active managers have attempted to repackage existing strategies into the ETF wrapper, hoping that the format itself will attract new money. The data suggests investors are not fooled. As Stockspot founder Chris Brycki has put it, “putting these strategies in an ETF wrapper doesn’t make them better value. It just makes their underperformance more visible.” The Magellan Global Fund ETF which charging 135 basis points plus a performance fee, returned 10.2% over five years to June 2025, against 15.7% for the MSCI World Index. It shed $2.8bn in outflows during 2024 alone.

The long-term performance data is damning. According to the SPIVA Australia Scorecard for year-end 2025, 85 per cent of active Australian equity managers underperformed their benchmark over 15 years. In global equities, the figure was 95 per cent. Active bond funds fared better, but even there, 82 per cent underperformed over the same period. These are not numbers that support the case for paying a premium.

Why settle for less bang for your buck, to cough up more money for less value, when you don’t have to?

2. The Mandate Massacre

If retail outflows are the slow bleed, the loss of institutional mandates is the arterial wound. Australian superannuation funds, which are managing over $4tn in assets, have historically been the engine of growth for active managers. That engine is being switched off.

Two forces are at work simultaneously. First, the mega-funds are bringing investment management in-house. AustralianSuper, Australian Retirement Trust, and Aware Super have all moved aggressively to internalise asset management, particularly across listed equities and fixed income.

These are very areas that domestic boutiques have historically dominated. The money hasn’t been coming in from HNW investors with millions to invest and cough up fees based on 1-2% of total FUM irrespective of performance. No, it is mandates from larger fund managers, from super funds.

Second, consolidation has reduced the number of institutional buyers in the market. Where there were once dozens of mid-sized super funds each running their own external manager relationships, there are now a shrinking number of giants. Each merger eliminates a mandate pool. Frontier Advisors research found that a quarter of fund managers it surveyed identified internalisation as the single biggest threat to their business.

The human cost has been stark. Magellan has been on a long and steady decline since late 2021 and the rot settled in right in late 2021 when it lost one mandate worth 25% of its total FUM. Platinum Asset Management lost a near $1bn institutional mandate last year and Perpetual has faced similar experiences. Fund managers that built their businesses on the assumption of steady institutional capital flows are now scrambling to pivot into the retail wealth channel, hiring heads of wholesale distribution and trying to reach financial advisers and high-net-worth clients who represent a smaller, more fragmented, and harder-to-serve source of revenue.

3. The Consolidation Effect

Super fund consolidation does not merely reduce the number of mandates on offer, it changes the nature of what is demanded. Larger funds have more sophisticated internal capabilities and are less reliant on external managers for strategic asset allocation decisions. When they do outsource, they tend to favour global giants such as BlackRock, Vanguard and State Street.

Big firms like these have the balance sheets, operational infrastructure, and global reach to service a $300bn fund. Australian boutiques with just $1-2bn under management simply cannot compete on those terms.

The result is a narrowing of the addressable market. A number of firms have already read the writing on the wall. Franklin Templeton’s Specialist Investment (FSI) arm closed four Australian investment teams in 2024, citing “client consolidation, internalisation of investment management and ongoing margin pressures.” The language was clinical and the implication clear: there is not enough institutional demand left to sustain all existing players.

The Roll Call of the Fallen

The closures have been accumulating quietly but consistently. In recent years, Australia has seen: Magellan shut its Core ESG and Sustainable strategies; Platinum close its Global Transition ETF; Maple-Brown Abbott wind down its Australian Sustainable Future fund; BNP Paribas close its Earth Trust; Milford Asset Management terminate its Diversified Income Fund; and Pengana International Equities face a shareholder revolt over strategy. Zurich Investments also closed its ACI Healthcare Impact strategy.

Not even ETFs have been exempt: 15 ETFs were closed in 2025. But people have shrugged it off because 71 were launched and perhaps the ones that closed would be doomed if they were typical managed funds given their industry – one high profile one was Betashares’ Solar Energy ETF.

The SPIVA Scorecard has confirmed the broader attrition: 52% of all Australian funds across categories were merged or liquidated over the 15-year period to the end of 2025. Liquidation rates for some sub-categories (particularly A-REIT active funds) ran as high as 18% in a single year.

Ox Capital’s case is particularly instructive. The firm was a genuine specialist in emerging market equities, not a generic product. It was rated, nominated for awards, and had an experienced investment team. It closed anyway.

Is There Any Hope?

There are narrow paths forward for active managers, but they require honest self-assessment about where genuine edge still exists.

Alternative investments such as private credit, infrastructure and private equity all remain a relative bright spot. Institutional super funds have neither the internal capability nor the regulatory appetite to fully internalise these asset classes. They are complex, illiquid, and require specialised origination and structuring skills. For managers with genuine expertise here, the runway is longer.

Small and mid-cap equities present another argument for active management. SPIVA data found that only 30% of active mid and small-cap managers underperformed their benchmark over 2025, far better than large-cap peers. In less-efficient corners of the market, skilled stock pickers can still add value. The operative word is “skilled” – persistence of top-quartile performance remains elusive, with just three of 195 top-quartile equity funds from 2022 maintaining that ranking over the subsequent two years.

Fixed income is also holding up better than equities. Active bond managers have delivered majority outperformance in three consecutive years to 2025 — a reasonable basis for the case that credit analysis and duration management remain skills that are hard to replicate passively.

Should You Buy Fund Management Stocks Like Magellan or Platinum?

Given this backdrop, the investment case for listed active fund managers deserves scrutiny. Morningstar’s analysis of seven major Australian active managers in Q2 2025 found average 12-month net flows had declined by 4 per cent of FUM — the second consecutive quarterly fall. Of those seven, only Pinnacle, Challenger, and Insignia were expected to generate positive flows through FY28-29. Platinum (now merged with L1 Capital into L1 Group) was forecast to lose more than 30% of its FUM per year over the same period. Its FUM fell from $15.bn at the start of 2024 to $7.5bn by September 2025.

Magellan’s share price fell 14% over 2025. GQG Partners, once considered a growth exception, lost 12% and faces what its own analysts describe as near-term challenges despite a longer-term track record. Pengana has fallen over 20%.

The honest assessment is that investing in listed active fund managers at this point in the cycle is a bet against a structural headwind. Revenue is fee-based and directly tied to FUM, which is in secular decline for most players. Cost structures are relatively fixed: talented portfolio managers are expensive and mobile. And the product the industry sells, active stock selection in liquid markets, is being systematically commoditised by passive alternatives like ETFs.

There are exceptions. Challengers with differentiated business models (retirement income products, alternatives, private credit), niche specialists with genuine and demonstrable edge, or firms benefiting from external acquisition interest may outperform. But as a sector thesis, buying listed Australian active fund managers currently means swimming against a tide that shows no sign of turning. Unless performance improves dramatically and persistently, and 30 years of data suggest the odds of that are poor, the structural compression of fees, mandates, and distribution will continue to grind down earnings.

Ox Capital’s wind-up may have made the AFR for a day. The forces that put it there are not going anywhere.