LONDON - Baring Asset Management has lost 10% of assets under management since the February crisis that threw its parent company into bankruptcy and led to the sale of its assets to Internationale Nederlanden Groep, Amsterdam.
Globally, the firm has lost about $4.5 billion in assets from 46 institutional clients from separate and pooled accounts, reducing total assets under management to just over $40 billion. That's four times the level of losses reported last March (Pensions & Investments, April 3).
Another $1 billion has been withdrawn by clients for various reasons, but that was offset of new inflows of $958 million. Jonathan Taylor, a director at Baring, notes clients have left for a variety of reasons not necessarily related to the February crisis.
The 10% loss of assets represents a loss of only 5% of revenues.
The early losses were spread evenly from worldwide clients, except for British pension funds. While non-U.K. markets have firmed up, the firm now is experiencing some erosion of its U.K. client base. The firm lost three U.K. clients with (pounds) 244 million ($390 million) in assets in recent weeks, including the 40 million ($60 million) Strathclyde Regional Council's pension fund for transport workers.
Geoff Singleton, deputy director of finance for the Glasgow, Scotland-based fund, declined to discuss the termination, but Mr. Taylor confirmed the loss.
Baring has pulled in some new money during the past six months, most of which have come from North American clients. It has garnered about $793 million from existing clients. It also has won $101 million from eight new clients: two North American pension funds, four U.K. charities and two off-shore insurers. Another $64 million has come from new mandates from existing clients.
Mr. Taylor said the firm also hopes to win some continental European clients shortly, and thinks business in Japan "is back on track."
"It's not been as dead as we had feared," he added.
Baring is facing growing pressure from its U.K. pension client base because of weaker performance in 1994 and the first half of 1995. The firm had accurately projected global economic growth levels but had misjudged the flow of funds back into home markets.
Thus, Baring took a bigger bet on growth in Asia and other emerging markets. Meanwhile, "some dollars were flowing back to North America and there was a substantial repatriation of the yen back into Japan," explained Nicholas Broadhead, director of U.K. institutional marketing.
For U.K. pension clients, which make up nearly half of its assets under management, the firm suffered a 7.3% loss in 1994, compared with 5.4% loss for the WM All-Funds Universe. During the first half of 1995, Baring's median return was 5.8%, compared with 7.6% for the benchmark.
But a move this spring to overweight Japanese stocks - for the first time in nine years - now is paying off, Mr. Taylor said.
For the five-year period ended June 30, the firm returned 11.4% for its UK clients, compared with 11.1% for the index, based on preliminary figures.
In addition, the freezing of cash holdings of U.K. clients during the crisis hurt the firm's reputation. Cash holdings are invested by Baring Brothers & Co., its sister bank. To avert any potential future problems, cash is invested among 28 different AA-rated banks. Separately, the bank has decided to outsource its (pounds) 11 billion custody portfolio.
Mr. Taylor notes the Bank of England's review of the Baring crisis cleared the asset management arm of any involvement. In addition, the manager had commissioned KPMG to review a Baring report on its internal controls.
To prevent further erosion of its client base, the firm needs to shore up performance and demonstrate to clients that its team of managers is stable, he added.
"The critical period for us will be the end of September," after the second piece of annual bonuses is doled out by ING, Mr. Taylor said.
The firm has lost eight professionals since the crisis, including Andrew Parry, formerly head of U.K. equities, who is becoming the new chief investment officer at Lazard Brothers Asset Management, London.
But Baring officials note the turnover is small in context of more than 140 investment professionals.
In addition, Mr. Taylor noted the backing of ING makes Baring sounder.
