Marketing will be difficult for Baring Asset Management Holdings Ltd., London, during the next six to 12 months, even with its parent out of administration and in the hands of new owners, said Peter Hartley, a managing director of Baring Asset.
Baring Asset's reputation was stained as a spillover from February's trading disaster that drove London-based Barings PLC into bankruptcy and forced its sale to Internationale Nederlanden Groep, Amsterdam. ING bought the assets and liabilities of Barings for (pounds) 1 and pumped (pounds) 660 million into the group.
An unnamed few clients of Baring Asset have dropped the firm because of the scandal. According to Mr. Hartley, the losses amounted to about 2% to 3% of the (pounds) 28 billion ($44.5 billion) total assets under management. He said Baring has, very roughly, about 370 tax-exempt clients worldwide, including about 130 in the United States and about 140 in the United Kingdom.
ING also acquired Barings' real estate, venture capital and managed buy-out subsidiaries, with about $2 billion in combined assets under management.
But Baring Asset was not implicated in the scandal. And subsequent reviews by "regulators, our auditors and ING Group officials" concluded "everybody is perfectly satisfied that everything in the asset management side has been prudent, above-board and professional," Mr. Hartley told Pensions & Investments.
Nonetheless, Baring Asset has taken over investment of the cash portion of portfolios for its U.K. pension clients, instead of handing the assets to its sister bank, Baring Brothers & Co. Under the old arrangement, more than (pounds) 600 million in cash from clients for which Baring also served as custodian, was at risk when the Barings Group was turned over to an administrator. Mr. Hartley said clients' securities were not at risk.
Cash now is being spread instead of being concentrated, a Baring spokesman said.
Still, some clients showed concern.
Spurred by the crisis, the (pounds) 2.3 billion ($3.63 billion) London Regional Transport Pension Fund will review its investment arrangements, a spokesman said.
The fund is divided roughly one-third each among Baring Investment Management Ltd., which runs the assets of U.K. pension funds, Gartmore Pension Fund Managers Ltd. and Schroder Investment Management Ltd. The trustees will review manager arrangements and the future of the scheme, the spokesman said. The first meeting probably will occur in two weeks.
Separately, Surjit Lale, investments manager at the (pounds) 850 million ($1.34 billion) Kent County Council Superannuation Fund, Maidstone, England, said trustees will review the fund's custody arrangements. Trustees previously had rejected the idea of obtaining an independent custodian.
But trustees will refrain from judgment on Baring for the time being. "It's a wait-and-see situation," he said.
(Separately, trustees at the Kent County fund have hired DTZ Debenham Thorpe, London, as adviser on a (pounds) 60 million real estate portfolio, replacing Richard Ellis Fund Management, London.)
These days, ING and Baring Asset officials are taking pains to reassure Baring's clients. A client letter from ING's Chairman Aad Jacobs, reported, among other things, that 1994 bonuses will be paid to Baring staff and that the previous profit-sharing system remains.
That meant clients "should be confident that Baring will continue to deliver the superior performance" that they had expected from Baring, Mr. Jacobs wrote. So far, according to Mr. Hartley, no one at Baring Asset has quit since the scandal broke.
Indeed, he said, Baring Asset has been able to attract an unnamed major figure from another money management firm to help with marketing in the Mideast.
According to Mr. Hartley, another letter to clients came from Baring's Chief Executive John Bolsover. It assured clients Baring Asset is "back in business" as before and that ING is "totally satisfied with the controls in place at Baring Asset."
Looking forward, the firm will be free to manage its business autonomously, but according to Mr. Hartley, Baring Asset will be reporting to the asset management side of ING, in the same manner that it ultimately reported to Barings PLC in the past. As as result, "we would encourage ING to put one to two non-executive directors on our board."
Although other changes have not been determined, Mr. Hartley surmised there could be cost-cutting moves in the future as Baring and ING blend operations. "Personnel, accounting and computer areas" could be targets for cost-cutting, he said, although specific actions haven't yet been discussed.
But on the bright side, Mr. Hartley cited some advantages for both parties in the ING takeover.
For Baring Asset, the firm pairs with an organization with "huge financial stability," which is an advantage to a business such as Baring's that requires constant capital spending (for example, Baring has 26 people following just emerging markets). Moreover, Baring is fortunate to have a new partner that understands the asset management business and one that still will let Baring remunerate and manage itself.
As a third point, ING also has a strong network of clients, especially in continental Europe, where Baring's presence is much more modest. (It hasn't been decided how the two separate asset management groups - Baring and ING - will target the same clients, or if they will; for now both sides are continuing to operate as they had before ING bought Baring.)
Among ING's attractions to Baring: its well-known name and its presence in the U.S. pension market.
As a corporate culture, "the Dutch tend to be more conservative than the British, and I suspect that Baring, being more internationally oriented, is more aggressive in the way it manages its business," said Mr. Hartley.
"But they don't want to change our culture. They see (ours) as one of the reasons they bought Baring .*.*. What I admire about ING," said Mr. Hartley, "is that they must be more entrepreneurial minded to have bought Baring in such a short time. That is a strong point, and a positive early indication of the way they are prepared to do business."