LONDON - European pension funds increasingly are hiring non-domestic money managers, often to run specialist mandates, according to a new survey by William M. Mercer Ltd., London.
While the leading money managers in European pension markets usually are domestic institutions, overseas managers are finding they can play a role, according to the report, European Pension Fund Managers Guide 1995.
Julia Hobart, principal with William Mercer's asset planning services, said in a release: "Over the past three years, there has been a discernible opening up in the marketplace. Where European pension funds are looking for investment managers outside their home country, they are looking globally, not just Europewide."
The survey also notes the increasing globalization of European pension funds. With the sole exception of the Portuguese funds, European funds have increased their foreign equity and foreign bond exposures at the expense of domestic bonds and real estate. Belgium and Ireland have the highest allocations to foreign assets, at 51% and 45% of total assets, respectively.
Surveying 140 money management firms, Mercer found half of them had mandates outside of their home countries. In addition, since the consultant published its first European pension funds guide three years ago, the number of specialist mandates has risen to more than 300 in 1994 from 116.
Specialist mandates are occurring not just in the regional equity or bond areas. Mercer officials have seen significant growth in mandates for tactical asset allocation, currency overlay, small-company stocks and emerging markets.
The growing use of asset/liability modeling also is boosting use of specialist mandates. It also is resulting in greater use of fund-specific benchmarks, the guide said. Use of passive management by continental European pension funds also is on the rise.
Mercer officials also note the growing number of money managers with operations in more than one country. In a few cases, institutions have more than one home country, Ms. Hobart said.
Non-domestic managers swiftly are ascending the ranks of pension managers, although domestic institutions tend to dominate the home market.
In the $380 billion Dutch pension market, Amsterdam-based ABN AMRO Asset Management tops the list with $7.9 billion in pension assets under management. But San Francisco-based Wells Fargo Nikko Investment Advisors is second, at $6.2 billion. Sixth on the list is State Street Global Advisors, at $1.2 billion.
In the $105 billion Danish market, Copenhagen-based Unibors Portfolio Management, a unit of Unibank, far and away leads the pack with $1.4 billion in assets under management. But Schroder Investment Management Ltd., London, ranks third, with $226 million, Daiwa International Capital Management UK Ltd., London, ranks fourth with $73 million, and Lombard Odier & Cie., Geneva, ranks fifth with $59 million.
Germany's $285 billion pension market is much more closed. The major banks sweep the top six slots, managing a total of $33.1 billion in pension assets.
Few non-German managers have penetrated the German market because of restrictions on who can manage funds. Where non-German managers have entered the market, their presence tends to be small. J.P. Morgan Investment Management, New York, ranks seventh with $607 million, followed by a bevy of London-based managers: Barclays de Zoete Wedd Investment Management Ltd., $202 million; Schroder Investment Management Ltd., $168 million; and Morgan Grenfell Investment Management, a unit of Deutsche Bank AG, $119 million.
Similarly, in the bank-dominated Swiss pension market, foreign managers are just starting to make inroads.
State Street ranks sixth, managing $1.57 billion. The next non-Swiss manager is Fiduciary Trust International, New York, at 12th, managing $529 million. In comparison, market leader Swiss Bank Corp. manages nearly $6 billion in Swiss pension assets, while Pictet & Cie. ranks second with $3.9 billion.
The United Kingdom, however, remains the toughest nut to crack for non-domestic managers, given that nation's historic provision of investment management services and the continued reliance on balanced management by about 70% of U.K. pension funds.
First Quadrant Corp., Pasadena, Calif., is the first non-U.K. manager to crack the list at No. 26, managing some $2.1 billion in British pension assets.
A.M.P. Asset Management PLC, the London subsidiary of the Australian insurance giant AMP Society, ranks 32nd, at $1.6 billion, and State Street ranks 34th at $1.5 billion. Those totals compare with $56.4 billion for the No. 1 firm, Mercury Asset Management Group PLC, London.