Discretionary U.S. tax-exempt assets of international and global money managers climbed 19.4% in the year ended March 31 - a substantial slowing of growth compared with the previous year's 50% jump and the 33% logged the year before.
For the year ended in March 31, Pensions & Investments' survey showed that assets of 125 global and international managers hit $317.352 billion. That compares with about $266 billion for the top 125 a year earlier.
The slowed growth heavily reflects market performance. Cumulatively, non-U.S. markets fared much worse than the year before, and managers themselves widely underperformed the indexes. For example, Reza Vishkai, international research director of Rogers, Casey & Associates Inc., Darien, Conn., says that the average international manager in the Pensions & Investments' Performance Evaluation Report posted a 1% gain vs. 6.4% for the Morgan Stanley Capital International Europe Australasia Far East Index for the time period. During the same period, the average emerging markets manager lost 12.2%, compared with a 10.7% drop in the MSCI Emerging Markets Free index.
On top of that, some fund sponsors may have postponed putting more money into the international markets - especially this year. Concerns have included the dollar's plunge to new lows - which prompted speculation that it might soon reverse course - and spillover from Mexico's late 1994 financial debacle. Rodger Scullion, managing director, Murray Johnstone International Ltd., Glasgow, Scotland, says he hears that international "assignments coming to consultants have recently slowed down." But some consultants disagree. Sue Rutherford, an associate with Ennis, Knupp & Associates, Chicago, reports that at her firm international searches - averaging 12 to 18 annually, are "continuing apace" this year.
P&I's data show few dramatic shifts. Following the pattern of recent years, many firms in the top 20 remained in the group, with only minor adjustments in ranking. For example, in the combined global/international ranking State Street Global Advisors, Boston, dethroned Chicago's Brinson Partners - which had held the top slot for the past two years. Brinson is now in third place, trailing State Street and Los Angeles' Capital Guardian Trust Co.
In addition, GE Investments, Stamford, Conn., and Fiduciary Trust Co. International, New York, joined the top 20. TCW Group, Los Angeles, and Pacific Investment Management Co., Newport Beach, Calif., fell out.
In the case of PIMCO, the firm counts its fund that gives allowable foreign exposure to its U.S. bond mandates. In the year ended March, a large portion of that fund's assets had been returned to the U.S. market from overseas, said Account Manager Anthony Faillace.
The decline in TCW's international/global total reflected a greater clarification of who's-managing-what-assets for the firm. In the past, TCW had counted both its international and global assets under management, even though Cursitor-Eaton Asset Management Co., New York, is the subadviser that manages TCW's global accounts. This year, TCW only included its international assets under management to avoid the double-counting.
Some management firms fared much better than others in gaining and keeping international/global assets. Among firms logging big gains: Putnam Investments, Boston, whose total jumped to $11.2 billion from $5.9 billion the year before. Putnam officials could not be reached for comment.
In addition, the assets of Principal Mutual Life Insurance Co., Des Moines, Iowa, swelled to $3.299 billion from $720 million the year before. Apparently, the firm had not included its international bond holdings in last year's survey.
For Wells Fargo Nikko Investment Advisors, San Francisco, international/global assets jumped a whopping $6.056 billion to $17.388 billion, while State Street's gain was almost $3.9 billion to a total of $22.565 billion, and New York's Morgan Stanley Asset Management registered a $3.9 billion rise in its international/global assets under management to $13.881 billion, P&I data show.
Among other top gainers, the international/global assets of First Quadrant Corp., Pasadena, Calif., shot up 178% to $2.893 billion; and for several firms including London's Rogge Global Partners, Edinburgh's Dunedin Fund Managers, and Marathon-London, assets approximately doubled in the past year. For Edinburgh's Blairlogie Capital Management, assets climbed to $479 million from $82 million.
The large jump in First Quadrant's international assets came from a surge of new allocations to the firm's global tactical asset allocation offering, said Robert Arnott, chief investment officer. His firm uses futures "to shift money from country to country and market to market around the world," he said. The strategy gained favor because of the "growing receptivity to the use of futures globally coupled with a dissatisfaction with some of the less disciplined international approaches that many traditional international managers use."
For Dunedin Fund Managers, the year brought seven new clients, including the pension funds of NYNEX Corp. and Montgomery Ward & Co. as well as the Washington State Investment Board and Rhode Island Retirement Systems, said Dennis Sheehan, marketing manager. He cites Dunedin's "strong investment discipline (value with earnings momentum) and stable investment team," as leading attractions.
John Makowske, marketing vice president of Rogge Global Partners, says the firm attracted six new clients he declined to identify. The global/international bond manager boasts "very strong performance and long 11-year track record," as key selling points, he said.
Among the firms recording sizable losses in assets: New York's OFFITBANK recorded a drop of $320 million to $68 million; international/global assets of Pinnacle Associates Ltd., New York, fell $194 million to $60 million; and those of Cashman, Farrell and Associates, Berwyn, Pa., fell $179 million to $53 million. Calls to Pinnacle and Cashman Farrell seeking explanations for the declines were not returned.