Internally managed verus externally managed funds for investment banking spinoffs.?

Question

Why does Investment banks such as Babcock and Brown and Macquarie choose to spin off its assets into a new listed fund which is externally managed? What are some of the advantages and disadvantages of the fund being externally managed? Likewise, what are the advantages and disadvantages of a internally managed fund from the perspective of these investment banks.

Answer 1

Diversity of Products is one reason. Two sets of Portfolio Managers will almost always manage their assets in different ways (subtle) even with the same investment guidelines.

This is not always bad. This allows the company to diversify their assets under management so that poor performance of an investment manager does not reflect as a poor mandate. For example if a bad Portfolio manager manages an Emerging Markets fund, then the company does not have to suffer because it chose to invest in Emerging Markets if it decides to split AUM between internal and external managers.