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Personal reflections on the history of CFS

Editor's note: On 22 August 1988, an accountant named Chris Cuffe joined First State Fund Managers (FSFM) at the age of 28, shortly after it had commenced managing $300 million of internal State Bank deposit funds and staff super. He was CEO within 18 months and by the time he left 14 years later, it had become Colonial First State and it was managing over $70 billion. This week marks the 30 year anniversary of that joining date. After Chris left in 2002, Colonial First State was split into its funds management side and platform/retail distribution side. Going full circle, the Commonwealth Bank plans to put these businesses back together in the float of Colonial First State next year.   

In this article I provide some personal reflections on my time working for one of Australia's funds management success stories.

Over 20 years ago, I became Head of Fixed Interest at a small investment firm that many people thought was about to be gobbled up by another. The FSFM business had been assigned zero value in the acquisition of the State Bank of NSW by the Colonial Mutual Group a couple of years earlier. Colonial at the time expected that all funds management activities would be taken up by its Melbourne-based Colonial Investment Management.

Was I crazy to join this tiny business?

Nevertheless, I left a senior role at the firm that was at the time widely regarded as the best fixed income house in Australia to join this little business that had about $1 billion in cash and $28 million (sic - million, not billion) in its bond fund. While some in the industry who knew FSFM well were encouraging about my move, many thought I was crazy.

FSFM had commenced in 1988 as mostly a cash and fixed income investor, to manage the approved deposit funds of employees and ex-employees of the State Bank of NSW. With interest rates well into double digits at the time, the vast majority was in cash.

However, FSFM’s equity business grew rapidly with Greg Perry at the helm. With all due respect to the many other fine equity managers I've worked or invested with since, Greg is the best stock picker I've known. Through the mid-1990s his ability was widely recognised by the independent financial planning community. By the time I joined at the start of 1997, the equity funds had become the growth engine of the business, which had just surpassed a total of $3 billion under management [Managing Editor's note: I remember the $1 billion party in 1991, when I was Deputy Treasurer at State Bank of NSW and FSFM was an almost inconsequential section in Treasury].

Growth had been so rapid that a large proportion of the staff were contractors, brought in to manage investor applications. Strategic discussions at the time had a base case that the coming year would be "a year of consolidation". However, that year didn't come. The business kept growing – rapidly.

Fixed income was part of that, with our funds under management reaching $60 billion around 10 years later. The Colonial Melbourne business that had been expected to take over FSFM was itself taken over in May 1998 and the name of Colonial's funds management arm instead became Colonial First State (CFS).

What were the reasons for CFS's success? Certainly, we benefitted from the fortuitous timing of being set up just as the rapid growth in Australia's superannuation industry was getting underway, but there was a lot more to it than that.

Strategic team building

By 1996, Chris Cuffe knew that, if FSFM was to enjoy sustainable success, it needed to have more than a great equities team. Balanced funds were still popular in superannuation at the time. These funds invest across asset classes with the same manager. So Chris began hiring managers to head up other asset classes. Sandy Calder was hired for listed property, Dave Whitten for global resources and I was brought in to the fixed income piece of the equation. There were some setbacks, especially in global shares, where the guy that had been hired to establish those funds went back to his previous employer the day they were due to launch, just before Christmas in 1996. But overall, the team Chris put together was effective and coherent, embracing complementary investment styles that could be blended well.

Strong performance

We delivered strong fund performance, which has to be a key plank for any business. Greg and his team delivered superb results in the equity funds from around 1994 onwards, in both large and small cap portfolios. Other asset classes then kicked in. In my first year heading up the fixed income team (1997) we had the best performing Australian Bond Fund, and listed property and global resources also did well.

End-to-end business

The industry was changing rapidly in the later years of the 20th century and CFS was able to change with it thanks to the leadership team having control of all aspects of the business. This included IT, which was a flexible and creative team led by a business-savvy guru, Derek Ngoh, who kept us ahead of the game. One of the drawbacks of becoming owned by the CBA a few years later was the loss of this end-to-end capability and the enforcement of ‘shared services’ on many parts of the business.

An excellent culture

At CFS we lived and breathed a positive, high performance culture. This came from the top, with the way Chris dealt with his team, modelling how all leaders within the firm were to deal with theirs. Good cultures empower their staff and equip them to do their jobs to the best of their ability. I have not personally felt as empowered to run the funds and make decisions as I was during the earlier years at CFS.

Focussed customer base and quality service

During its rapid growth period, CFS focussed exclusively on servicing independent financial planners. We had no ambition to deal directly with retail investors or to have in-house advisers, seeing the independent planners as the experts in looking after the end-investor’s needs. To this target market we provided high quality, personalised service. I fondly remember walk-throughs, when Rob Adams or one of his team would bring around a group of advisers to show them the investment teams at work.

What they saw was the culture being lived out. They picked up a positive vibe from all of the teams, often remarking that they could see people working at CFS who were energised and clearly enjoying one another’s company.

As a result of all of these factors, the CFS brand became very strong. Also, by early 1998 Colonial’s CEO Peter Smedley became convinced that Chris knew how to run a business and deliver results. So Smedley ditched the plans for the Melbourne funds management business to be the driver of a combined entity and instead the First State team dominated the in-house merger.

CFS then took over the Australian operations of Legal and General (June 1998) and Prudential (August 1998) in quick succession as Smedley (nicknamed 'Pac Man' at this time) built Colonial into a diversified financial services company. That in turn made the business a takeover prospect, an opportunity the CBA grabbed in 2000, in what was then the largest corporate takeover in Australian history.

That created another situation where the CFS team was in competition with the new owner’s in-house fund manager. That turned out quite differently. Suffice to say for now that my team merged with the Commonwealth Investment Management fixed income and credit team in 2003, and we enjoyed some great success over the next few years with Tony Fitzgerald's team.

I’ve been gone from CFS for five years. I often think back on those exciting times when I joined Chris and Greg and the rest of the team with a dream of becoming the biggest and the best. Some dreams do come true.


Warren Bird is Executive Director of Uniting Financial Services, a division of the Uniting Church (NSW & ACT). He has 30 years’ experience in fixed income investing. He also serves as an Independent Member of the GESB Investment Committee.

March 25, 2021

August 2010 after finishing university with an economics degree I started looking for a job. The recruiter at the time mentioned a job at Colonial First State in the Contact Centre working in Martin Place. It felt like a dream come true for a young twenty year old graduate trying to get into finance sector after the GFC. I still remember that sunny spring morning in September 2010 climbing up Martin Place to work in the Channel 7 building. It was one of the best times of my life working in that contact centre and the friends I made through the journey. Most important out of all the places I have worked since CFS had the best culture I have ever seen. The contact centre was my first entry level role but it provided me with the skills and development that I needed to progress throughout my career across CFS and eventually across CBA. Its sad knowing the company I first started working for is getting sold but I have faith that the culture and the people will continue to make CFS grow and shine.

September 12, 2018

Agree with those as it was the best place to work. I got to see the organisation before and after Chris. I had the chance to work when Chris, Greg, Warren, Frank, Rob and Derek were there, I left after the CBA take over. Later, I returned as a contractor by then Chris et al had left. The first time, I was hired by Derek in IT to run a straight through processing project. A culture is communicated by the stories. The first story I heard was how at the start, Chris was given a broken chair to sit in a corner as the organisation did not see the value in the funds management. The point: humility as a strategic advantage, it allowed you to learn and grow. The collegial atmosphere, accessibility to everyone no matter their position, the implied trust that once you were given a job you will do your best did bring out your best. When I returned later, the stories had changed so had the place and the people. New stories were about market share, how 52 Martin pl was a tacky place unfit for a giant. Arrogance, fear and suspicion had replaced the trust, humility and openness. The organisation which at the start craved to contribute, later (as revealed by the royal commission), forgot how much it could hurt.

August 27, 2018

Best company I ever worked at. Examples of how 'culture lived out' on a daily basis together with leadership, mutual respect, integrity and the focus of customer excellence at CFS should be in today's text books or at least more frequently referenced.

Whenever I talk about my days at CFS the first and foremost thing that always come to mind was its culture. CFS's great culture had stemmed from the very top i.e Chris.

Sue P
August 26, 2018

I joined CFS as one of those contractors in 1993 and became permanent in 1995. The growth was incredible. I remember the ‘year of consolidation’ that never really happened due to ongoing growth. I remember us having only one and a half floors at 52 Martin Place and the office layout being constrained by client services staff having to go to the file room to grab paper client files while on the phone to a client. I worked 4pm to midnight for many months supervising the scanning of the paper files into EDGAR. Did EDGAR really stand for ‘electronic data gathering and retrieval’ or was it a nod to someone’s middle name? I remember being in the tea room making a cuppa when Chris came in to make a cuppa as well. He said “Sue, CFS has got so big I don’t know everyone. I challenged someone who followed me in the door and it turns out that they have been here 18 months.” To me that sums up all that was good about CFS, Chris Cuffe wanting to know the names and faces of his staff. CFS was very hard work, but lots of fun in those early days. I left in early 2014 for a tree change.

Paul Scully
August 24, 2018

Whatever the truth of all the above, there is no doubt that the underlying theme was one of recognising the advisor as the customer at the retail level - short termism at its most potent. People like me who challenged that (at other organisations), or at least argued for two client relationships - advisor and end client - essentially lost out. This was as true of First State as anyone else from advisor feedback received at the time.

This paradigm led to the no dual commisions argument under which a direct client was charged the same as an intermediated client being predominant. This was inherited from life insurance and was justified on the dubiously legal product fee hypothesis and eventually manifested partly as the no service phenomenon at the Royal Commission.

We all neeed to acknowledge our shortcomings.

August 24, 2018

I agree and have made this point before - the wealth of many, and there are no individuals being nominated as the shortcomings were widespread as you point out, was built on what was then, but can be seen now, and was then by minority elements, mostly without power, as a poor structure never really in alignment with the interests of end consumers.

Phil Kneale
August 24, 2018

Warren, you have an awesome memory for detail. I cannot quibble with any of that.

I did use the term "merger" in the same paragraph where I later used, probably inappropriately, the term "takeover" (although they are different things by degree only). On the asset management side, I agree it was a merger of two teams. However, much of the hierarchy at CIM didn't get a spot in the new structure and I do recall some of them being quite cranky at what they saw as a slightly unbalanced merger, especially as they had more funds under management.

Warren Bird
August 24, 2018

Yes, Phil - and thanks for your remark about my memory! All my observations are from my place as one of the fund managers. As time went on we became more distanced from product issues.

The first stage of that was in around late 1999 or early 2000 (I can't recall exactly) when the role of General Manager, Investments was created. John Pearce (now at UniSuper) was brought in to fill that role. Previously all the fund manager heads reported directly to the CEO (Chris), but now we reported to John. That was a bit of a culture shift within the business, but Chris and John handled it well and we all got used to it fairly quickly.

The CBA takeover of Colonial created new issues for the product side of the business to deal with and eventually the funds management business was completely separated off. This was in 2005 when the firm was divided into CFS Global Asset Management and CFS Investments (Graham mentioned this in his editorial introduction.) Warwick Negus became the CEO of GAM. The main change for me at that time was that Tony Fitzgerald and I became Co-heads of Global Fixed Interest and Credit and we took over management of the teams in London and Hong Kong as well as the Sydney business.

But that's probably enough from me for now. The main article was focused on the time that Chris was at CFS, and we're going way beyond that now.

Warren Bird
August 23, 2018

I didn't dwell on the CBA takeover, but Phil's last comment needs some qualification.

CBA acquired Colonial in 2000. However, until 2003 Commonwealth Investment Services and Colonial First State continued to operate as separate businesses. When this changed it was actually a merger, not a takeover by one or the other. The CFS brand was retained and CIS moved out of the rat-infested offices they had been in on George St up to Level 30 of the Colonial Centre in Martin Place, but apart from that there were clear elements of both organisations that remained in place.

This was most evident in the retention of two Australian equity teams as separate groups, with Chinese Walls between them. The general marketing idea was that the old CFS 'growth' team would continue to market to retail investors, while the old CIS core team would market to institutions.

Within fixed income, we actually undertook what I think was a very well executed merger under two team heads. Tony Fitzgerald became Head of Credit and I became Head of Fixed Interest. Members of my CFS credit team joined with members of Tony's team to become what came to be recognised by several of the asset consultants as the best corporate bond team in Australia at the time. Francois Kong came across from CIS to be my deputy in the fixed interest part of the business, with Tony Togher and his market-leading cash management capability also reporting to me at the time.

This worked very well. Francois and I refer to the 2003-06 period as 'the golden years' for fixed interest and credit, as we picked up several new mandates, including a couple of billion dollar portfolios for domestic and overseas institutions, enjoyed strong performance and improved research house ratings, and even worked with the core equity team on a jointly managed absolute return fund. (This concept was initiated by a discussion with Graham Hand, so he can share the credit for it.)

Chris Cuffe was definitely still around at that time of the merger. I had a meeting with him and the Chief Investment Officer, John Pearce, during the discussions in 2003 as we sorted out the merged structure. I believe that the Credit/Fixed Interest team split was John's idea as a way of making the combined entity greater than the sum of its parts.

So, whereas they were definitely take-overs in 1998 when FSFM became CFS by absorbing Colonial Investment Management and then the funds businesses of L&G and Prudential, the Commonwealth and Colonial funds businesses definitely merged. At least at the level of managing portfolios. The advice businesses of Commonwealth were a different matter, much more complex and I wasn't closely involved by then so I can't really comment.

Chris Cuffe left soon after this merger process got underway in early 2003. When he announced to the staff of CFS that he was leaving he received a prolonged standing ovation. Richly deserved, he was the best boss most of us had ever or will ever work for.

Phil Kneale
August 23, 2018

Prior to the purchase of Colonial in 2000, I was in CBA's Commonwealth Financial Services - which I like to call "the original CFS" just to irritate long-term Colonial First State die-hards (of which I am now one, I suppose).

A little while after the takeover, I was asked to move over to the new CFS from the old one. I was quite excited about this because First State had developed quite a reputation over the previous 5 years.

Everything Warren and Rick say about the culture is true, even though by the time I got there the spectre of assimilation with the bank had everyone on edge. I particularly liked the fact that, compared to what I was used to, there was more focus on knowledge, expertise, doing the right thing and avoiding the hiring of show-ponies and yarn-spinners (well, one or two might have snuck through).

I think Rick's concluding line above should be reversed from "Once Chris left, the CBA pounced and the rest is history" to "Once CBA pounced, Chris left and the rest is history. Unfortunately, total assimilation with the banking bureaucracy was a long and arduous journey, ending predictably.

There's just one myth to bust, though. Contrary to popular assumption, First State was not the bigger player in the merger of Colonial and CBA's wealth management arms. In both the asset management market and the retail funds under administration market, CBA had significantly greater market share than Colonial. This was one of those cases where a smaller player takes over a bigger player.

Rick Cosier
August 23, 2018

I joined Colonial First State in 2000 on a three month contract as Head of Brand and Communications (thank you Joanna Wagstaff!!), and didn't actually vacate the premises until many years later. Leadership, mutual respect and client focus are terms which are present in every corporate mission statement but at CFS they were integral to its success.

CFS was undoubtedly the best company I ever worked for, and because it started small it was able to create its values from scratch, and maintain those values by careful hiring and promoting from within. It is virtually impossible to change an existing culture in a large company because it is too entrenched and too political. Every week a small group of managers would meet and discuss the important issues and future plans. Attendees were from Operations, Admin, Distribution (Sales), Marketing, Client Services and Legal. Ideas were shared and having listened to everybody's view, Chris would make a decision. If I remember correctly, we only had one, maybe two legal people in the organisation. Adjudications were made on a balance of commercial reality and moral obligation because then, as now, the corporations law is subject to very wide interpretation.

Once decisions had been made, everyone worked towards the same goal because of the mutual respect and deference to a truly inspiring leader. I can't remember any politics, and yes it sounds rose coloured glasses but that's what it was like. Portfolio managers did not view themselves as masters of the universe, and were happy to chat about how best to market and distribute their funds. Sales and marketing worked together, and somehow we managed to achieve the confidence and trust of both financial advisers and investors without rancour or suspicion. Middle managers were empowered and not simply conduits to the rank and file. Of course it helped that we only occupied two floors at 52 Martin Place but even when the business grew we managed to retain the small company mentality.

It couldn't last of course. Once Chris left, the CBA pounced and the rest is history.

Rob Garnsworthy
August 23, 2018

Graham, regarding your editorial:
<em>"It's difficult to place the Royal Commission revelations in historical context without sounding nostalgic about the good old days. Bankers were no angels in the nineties. Coincidentally, Cuffelinks' co-founder, Chris Cuffe, joined (Colonial) First State 30 years ago yesterday. As CEO for 12 years, he merged First State with Legal & General, Prudential and Colonial, and often made decisions to close inferior products, even when the margins on the old products were better. He worked on a principle of investor first and corporate second, regardless of the short-term impact on profit when new products were cheaper and better for clients. But Chris has not worked at CFS for 15 years now, and he is too modest to claim 'the old CFS would never have done that'"</em>

As someone who was there at the time, this is factually incorrect! Colonial took over the State Bank of NSW, First State "came with it" and was the jewel in the crown. Colonial under Peter Smedley took over Prudential and Legal and General not First State and not Chris Cuffe. I have a lot of time for Chris but I suggest you correct the error.

Graham Hand
August 23, 2018

Thanks Rob. You are correct regarding Peter Smedley and State Bank. My comments relate to Chris merging the funds management businesses of those entities.


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