When Financial Standard
first met BlackRock's Christian Obrist at the end of June, he has been in the country only a few days and was being introduced to local media. What's the biggest challenge for you in the new role, we asked him.
"Figuring out the 20% of the distribution that controls 80% of the wealth," he said without skipping a beat.
The ETF industry in Australia is still very much in its infancy.
Obrist is the newly-appointed guardian of BlackRock's $12 billion plus exchange-traded funds business in Australia - the "plus" because it has a sizeable but undisclosed business with Aussie institutions who mainly buy iShares' US and UCITs funds.
He took over from Jonathan Howie who moved to Hong Kong to head BlackRock's equity index strategy for Asia Pacific after three-and-a-half years as the head of iShares Australia.
This is Obrist's first Australian stint after a globe-trotting career of investment banking and asset manager sales in Hong Kong, London and his native Switzerland.
Obrist was born to a Swiss father working in the hotel industry in the Philippines. A relatively privileged upbringing by his admission, he went to international schools as the family moved around Malaysia, Singapore, Hong Kong and China through his childhood.
There were piano lessons, bits and pieces of Asian languages picked up through the moves and a return to Switzerland for university where he completed a Masters in strategy and organisation.
His first job out of university found him at the sales desk of UBS' trading floor in Switzerland in 2004. He had opened a brokerage account when he turned 18 to trade stocks, options and warrants - and he got a "proper deep dive" into fixed income derivatives whose trading sales he handled.
"Coming out of university where almost every graduate had the same sort of profile, my international experience growing up was something that differentiated me," Obrist says.
Four years into his maiden financial services job, rival bank JP Morgan poached his boss and along went Obrist sometime later, working in a similar role but more multi-asset focused.
"Looking back to that role after my 10 years at BlackRock, doing cash bonds [for a year at JP Morgan] was an extremely educational part of my years within the investment banks because for me, knowing the underlying [workings] of what to talk about is extremely important," he says.
Lehman Brothers went down just two weeks after Obrist switched jobs. JP Morgan probably shrunk its sales team by half, he says. Obrist was retained.
JP Morgan moved him to London and he ended up staying with the investment bank for about four years.
"In those four years after the GFC, the investment banking industry changed a lot," he says. "It became a lot less attractive to work there and that's when I decided to make a move to BlackRock."
He got the opportunity to head iShares' institutional business in Switzerland in 2012 - eight years after he came out of university.
Obrist later moved to Hong Kong where he headed BlackRock's wealth, retail and asset manager distribution for ETFs and index investments across Asia ex Japan - his last role before moving to Australia to head the iShares business here.
For someone who has spent his entire career in investment banking or asset management sales, Obrist speaks in a genteel, open manner, eschewing the fast-talking style usually preferenced by sales and distribution professionals.
He invests in wine - and a few hundred bottles are stored in London City Bond.
"I invested in French first growth au premier like Bordeauxs when they came off after the first correction in 2011. Unfortunately they have corrected even more," he says. "Which is why ETFs are so great because you are so diversified."
He counts as his mentors not financial giants but three personal friends: a JP Morgan client who became a friend, his first boss at UBS and his godfather who later retired in Australia.
As Obrist takes the mantle at iShares Australia, he faces a raft of changes.
BlackRock lost its top spot as Australia's largest ETF provider to Vanguard earlier this year. It hasn't launched any new Australian exchange-traded products since January, instead tightening its product line to 34 ETFs, shutting five and re-domiciling 14 others from US to Australia. In July, a distribution team member moved to rival Betashares. And separate to all of this, the corporate regulator is tightening its watch over the rapidly swelling ETF industry.
Yet, the changes are not as extreme as they sound. BlackRock still has an $11.8 billion slice of the $41.5 billion Australian ETF pie. iShares products take three spots of the 10 largest ETFs by market cap and the 10 most liquid ones, according to August numbers.
"The ETF industry in Australia is still very much in its infancy," Obrist says. "What was done here [by BlackRock] was very much building an exposure and a lot of that was done through cross-listing funds now it's about engaging with investors through technology and finding segments of growth in the retail-institutional segments."
"This year has been focusing on the iShares changes which were in the works for about two years and will all be localised by 22 October," he says.
Of the about $200 million that was in the five iShares ETFs that BlackRock shut down, about half went into US funds or duplicate Australian ETFs while the other half of the money possibly flowed out.
Obrist also doesn't have immediate plans for actively managed ETFs in Australia.
"We are not going to go down that track at the moment because of the single market maker model and we strongly advocate for a multiple market maker model where your ETFs are put into a competition to trade," he says.
"If you have a product that is in a single market maker model and the market starts to tank, you have one trading desk to get a price and you have no pricing competition."
Obrist has added another person in Melbourne where a lot of iShares' business is based, and another to the sales team in Sydney.
As for the answer to the 80/20 question Obrist pondered out aloud in our first meeting, there doesn't seem to be a correct answer in the Australian context.
"The money is concentrated but the distribution is fragmented," he says. "Commonwealth Bank for example controls 40% of wealth but under it are several dealer groups and advisers," he says.
"The Royal Commission may increase this fragmentation as more advisers go independent but it will be a tailwind for ETFs and the managed accounts industry, owing to a demand for transparency."