As investors piled into high-flying foreign markets, the discretionary U.S. tax-exempt assets of international and global money managers vaulted 52% in the year ended March 31, the largest percentage gain since 1986.
According to Pensions & Investments' annual survey, assets of global and international managers jumped to $269.494 billion, compared with $177.368 billion last year. The tally was all the more impressive, given there were six fewer respondents to this year's survey. Those failing to respond were typically smaller managers. But two firms, Dusco Inc. and Travelers Corp., reported having exited the international arena.
With one exception - Rowe Price-Fleming International, Baltimore - the 10 largest international/global managers remained the same from last year, with only slight shifts in their rankings. Morgan Stanley Asset Management, New York, replaced Rowe Price-Fleming among the top 10, with an almost $6 billion leap in global/international assets under management, to rank sixth at $9.972 billion. Rowe Price-Fleming fell to 11th from seventh place.
Among the big players, third-ranked Capital Guardian Trust Co., Los Angeles, saw its global/international assets swell nearly $6 billion to $17.1 billion; assets managed by top-ranked Brinson Partners Inc. of Chicago, leapt $4.4 billion, to $18.9 billion; and New York's Bankers Trust Co. added more than $4 billion in global/international assets under management to a total of almost $8.6 billion during the 12-month period.
Other big gainers among this year's 50 largest managers included: Bank of Ireland Asset Management Ltd., Dublin; Marvin & Palmer Associates Inc., Wilmington, Del.; Standish, Ayer & Wood Inc., Boston; Baillie Gifford Overseas Ltd., Edinburgh, Scotland; Wright Investors' Service, Bridgeport, Conn.; RCM Capital Management, San Francisco; and Brandes Investment Partners Inc., San Diego. In each case, global/international assets under management at least doubled in the 12 months.
Market appreciation, along with surges in new investments, contributed to the overall ballooning sums. During the year ended March 31, the Morgan Stanley Capital International Europe Australasia Far East Index rose 22.83%, the MSCI World Index increased 14.08% and the International Finance Corp.'s Global Emerging Markets Index jumped 43.6%.
Broadly invested international equities remained among the most popular strategies. But increasingly, emerging markets holdings are being tucked in with international mandates. "Of the searches we've done this year, clients wanted international (equities) with the capability of doing emerging markets opportunistically even more than (they wanted) plain-vanilla international," said Leslie Kautz, a director of Asset Strategy Consulting in Los Angeles.
"The trend is likely to continue as you see people making second and third (international) hires. It makes sense to get more diversification, and this is a way to do it while getting exposure to high growth markets," Ms. Kautz explained.
Although emerging markets' overall performance has soured this year, managers known for that expertise were popular in 1993, as those markets roared.
"Most definitely, more clients were drawn to us for emerging markets management last year," said Donald Reed, president of Templeton Worldwide Investment Counsel, the Fort Lauderdale, Fla.-based money management organization of Templeton Worldwide Inc. The firm's emerging markets assets "are managed in Hong Kong by Dr. Mark Mobius; and there's no question that he's a recognized expert in emerging markets." Since last June, most new international/global assignments won by Templeton went about half to international and half to emerging markets mandates, Mr. Reed estimated.
In the year ended March, Morgan Stanley Asset Management attracted more new accounts for emerging markets investments than for any of its other 11 international/global investment offerings, said Rick Woolworth, a managing director.
However, the firm also saw "substantial additions" of money to existing accounts for international equities, he added. (Unlike some other firms, Morgan Stanley Asset wasn't offering international portfolios that included emerging markets stocks until this year.)
Investors - especially those participating for the full year - were evidently rewarded. According to Mr. Woolworth, the firm's emerging markets portfolios had a whopping 70.2% composite return, while the composite return of the international equities portfolios was 39.7% in the year ended March. Those compare with EAFE's 22.8% rise and the 43.6% gain in the IFC's emerging markets index.
Baillie Gifford Overseas' assets managed for U.S. tax-exempt institutions swelled $744 million to $1.24 billion in the period. The rise was all the more impressive because the firm closed its doors to new clients from November 1992 to July 1993. As Robin Menzies, a Baillie Gifford director explained, the firm, which accepts no more than 20 new clients a year, had taken in 20 by late 1992.
The Bank of Ireland's global/international assets under management for U.S. institutions jumped $919 million to $1.467 billion in the 12 months ended March 31. The firm, which landed its first U.S. institutional client in 1989, had 71 clients by the end of this year's first quarter. In 1994, the firm won assignments to manage international equities from such pension funds as Oklahoma Firefighters' Pension & Retirement System; the Chicago Transit Authority Employees' Retirement System; and the Hawaii Employees' Retirement System.
According to Joel Whidden, the firm's vice president of institutional sales, the Bank of Ireland's attractions include "a strong emphasis on client servicing; an outstanding performance record that helps get us into selection finals; and a process and philosophy - including a bottom-up thematic stock picking approach - that people are comfortable with."
As for performance, the firm wracked up a one-year return on international portfolios of 25.05%, compared with the EAFE's 22.8% gain; for the firm's nine-year investment track record in dollars, Bank of Ireland Asset Management gained an annualized 27.41%, compared with EAFE's 18.09%, said Mr. Whidden.
While a number of global/international managers registered drops in assets under management, only WorldInvest Ltd., London, reported fewer assets yet still remained in the top 50. In the year ended March, WorldInvest's global/international assets slid $116 million to $3.186 billion. Susan Leader, WorldInvest's U.S. marketing director, cited a loss of two large global bond accounts, one in the second quarter and the other in the fourth quarter of 1993.
She wouldn't identify the accounts.
Nonetheless, she said the firm, known for its aggressive investment strategy in both international stocks and bonds, had won eight new institutional accounts - evenly split between foreign stocks and bonds - in the first five months of 1994. Among the new clients were: Fairfax County Retirement Funds, Fairfax, Va.; Wichita (Kan.) Retirement Funds; and the pension fund of Toyota Motor Sales USA Inc., Torrance, Calif.
