LONDON - Callan Associates Inc. and Bacon & Woodrow are expanding their cooperative asset consulting efforts to the world.
San Francisco-based Callan and London-based Bacon & Woodrow said they would share money manager databases and work jointly for multinational pension clients on investment and custodial issues.
Now, they are taking the next step, creating a 50-50 joint venture to service multinational clients and other international clients.
Both firms have major presences in their home markets, but seek to grow internationally to service the needs of multinational clients. Callan and Bacon & Woodrow advise on the investments of some $350 billion and $200 billion in assets, respectively.
Many observers had questioned whether the cultures of the two groups would mesh: Bacon & Woodrow's investment consulting arm is the offshoot of a leading U.K. actuarial firm, while Callan is solely involved in asset consulting.
Officials at both firms insist the alliance is working well and that their cultures are very close. What's more, they have worked jointly on 10 multinational accounts.
The joint venture, which represents a strengthening of their ties, is awaiting pending changes in California law that will permit Subchapter S corporations to own other entities. U.S. law affecting this area recently was changed.
The new London-based joint venture, whose name will be some combination of the two firms' names, will consult to multinational corporations, very high net worth individuals, central banks and other large pools of capital, explained Nigel O'Sullivan, an investment partner at Bacon & Woodrow who has spearheaded the joint efforts with Callan.
Mr. O'Sullivan and Nick Fitzpatrick, head of Bacon & Woodrow's investment consulting practice, will oversee the joint venture. Callan will be represented by Joseph Barcic Jr., a senior vice president in the firm's Morristown, N.J., office, and Gordon Dickinson, a senior vice president in its Chicago office.
Initially, the joint venture will focus on expanding to continental Europe, where Bacon & Woodrow already has affiliated offices in 26 countries under the umbrella of Woodrow Milliman, in combination with Seattle-based Milliman & Robertson.
Likely targets include countries such as Spain, France and Italy, all of which recently have adopted legislation encouraging creation of private pension plans. In addition, Nordic countries are starting to diversify their institutional assets abroad, Mr. O'Sullivan noted.
Japan also is an early target; Bacon & Woodrow established an office in Tokyo a year ago and has developed an asset/liability modeling capability.
Eventually, the joint venture could expand to other parts of Asia. Woodrow Milliman has member firms in Japan, Hong Kong and Australia, although an additional alliance with an Australian firm is being sought. Mr. O'Sullivan acknowledges it will take some time to build a global practice.
Milliman & Robertson has just announced it will launch its own U.S. asset consulting practice, headed by F. Jeffrey Van Orden, who previously was marketing director of Newbold's Asset Management.
Mr. Barcic said no conflict will exist between Milliman & Robertson and Callan because there is very little overlap in their client bases. In addition, he noted Callan will provide support for M&R's new consulting unit and Mr. Van Orden previously was a consultant at Callan.
Bacon & Woodrow has 45 asset consultants, and the consulting unit accounted for 8% of the firm's total revenue last year. But the number of consultants could grow to 65 to 70 with expansion of the international side, Mr. O'Sullivan said.
Meanwhile, Bacon & Woodrow has named Graham Farren as managing partner, replacing David Hager who stepped down from the role at the end of January.
Mr. Farren remains as head of the firm's employees benefits practice.
Bacon & Woodrow officials said Mr. Hager stepped down as managing partner before the end of his three-year term, scheduled for May, because of conflicting demands on his time.
In particular, his appointment as investment consultant to the (British pounds)15 billion ($24 billion) Electricity Supply Pension Scheme last November is taking a huge amount of his time.
Mr. Hager will take a smaller management role, overseeing the firm's financial and commercial matters. He also will pursue Bacon & Woodrow's new vision of becoming a "finance focussed firm."
Under that strategy, various practices will coordinate more to add value for clients. Insurance, pension, employee benefits and investment consulting will cooperate to a greater extent, making the firm "much more client focused than service-line focused," explained Helene Hill, marketing manager.
The partnership also has decided not to pursue incorporation. The issue is key because the current structure exposes all partners to unlimited liability.
Nederlandse Reassurantie Groep Holding N.V., which later became a part of ING Groep, Amsterdam, had sued the firm, alleging bad advice on the reinsurer's 1990 purchase of Victory Reinsurance Co. Ltd. While Bacon & Woodrow ultimately won that litigation, the lawsuit affected morale within the firm and its hiring ability for some time.
Instead, Bacon & Woodrow is reaching agreements with individual clients limiting its potential liability, Mr. Hager explained.
Bacon & Woodrow also is awaiting the outcome of a government initiative allowing creation of limited liability corporations. If the legislation is suitable, the partnership could go down that route, he said.