The largest U.S.-based money managers saw their assets from foreign tax-exempt institutions vault 106% - to $122.5 billion - in the three years ended June 30.
The data, from a Pensions & Investments survey, quantify the growing trend toward American money managers finding ever more business abroad.
In a study done earlier this year, the London office of InterSec Research Corp. found U.S.-based managers accounted for 34% of the total number of foreign managers hired by major continental European institutional investors in 1994. In 1990, that percentage was 8%.
On a global view, P&I found that Europe provided the single largest regional source - 25% - of foreign tax-exempt assets for large American managers.
The Netherlands provided 11% of the total $122.5 billion in foreign tax-exempt assets, making it the single largest country contributor. Canada supplied 10% of the total, ranking it second.
For this report, P&I surveyed the largest 200 managers based on total tax-exempt assets under management as of Jan. 1, and the largest 50 U.S.-based international managers as of March 31, most of whom also ranked among the top 200. Non-U.S.-based managers were eliminated. Sixty-six managers responded; the 41 qualified respondents are included in the accompanying chart.
Experts cite a combination of factors for the leap in managers' foreign-sourced assets:
Slowed growth in the U.S. defined benefit pension market;
The rising clamor for pension programs outside the United States, increasing the amount of investible assets up for grabs; and
Increased diversification of institutional assets outside the United States, leading these investors to consider hiring foreign managers.
Multinational companies' growing desire to use some of the same managers for their subsidiaries' pension funds. They get economies of scale, which should result in lowered fees and lessened demands on corporate staff.
"We have tried on selected occasions to see if it would make sense with certain of our foreign plans to use managers who also manage assets for us in the United States," noted Charles Service, corporate director-capital management and trust investments, Unisys Corp., Blue Bell, Pa. Some managers are based in the United States; some are based abroad.
Among firms, J.P. Morgan Investment Management Inc., New York, ranked first with a total of $30.68 billion in foreign-sourced, tax-exempt assets as of June 30. That amount represents J.P. Morgan's non-domestically invested accounts of these overseas clients, said Keith Schappert, the firm's president.
J.P. Morgan benefits from an expanded presence abroad and its international reputation, said Mr. Schappert. With a London office that opened in 1974, he said, "we have been around as long or longer" than most of its competitors.
Wells Fargo Nikko Investment Advisors, San Francisco, attracted $20.2 billion in assets from non-U.S. tax-exempt institutions - ranking it second in P&I's survey.
According to Patricia Dunn, chief executive officer of the defined benefit group, the firm had committed itself to "globalization" as a result of its 1990 joint venture with Nikko Securities Co. Ltd. By 1992, "we were opening offices in London, Tokyo and Toronto," said Ms. Dunn.
"The growth you see in the 1994-'95 period is really the result of having made an investment to globalization in the early 1990s," said Ms. Dunn.
"Structured" investment products - for which Wells Fargo Nikko is known - are becoming more popular abroad, she said. In fact, her firm expects faster growth in assets under management from outside the United States as more non-U.S. investors adopt this style.
The firm's non-U.S. assets under management will grow automatically, once its purchase by Barclays PLC is completed later this year.
In the three years ended June 30, foreign-sourced tax-exempt assets under management of Fidelity Management Trust Co., Boston, rose 791%, to $972 million. Fidelity ranks 14th in the survey.
Edward Madden, executive vice president, said so far, Fidelity is mainly winning U.S. specialist mandates from foreign institutions. Mr. Madden finds that foreign institutions "want to hire U.S. managers when there is a U.S. mandate involved. That wouldn't have happened five years ago."
InterSec's research underscores the trend. That firm found the bulk of appointments won by U.S.-based managers from European institutions is for investment in America.