For some international and global money managers, the year ended March 31 was a business boon.
U.S. institutional assets handled by the top 50 international and global money managers grew 27.5% to $455.1 billion, according to Pensions & Investments' annual survey.
For the largest 125 international and global managers, assets jumped an even higher 29.8% to $519.4 billion during the period.
This year's rises were all the more impressive because they heavily represented net asset inflows, since market appreciation was low. In the year ended March 31, the Morgan Stanley Capital International Europe Australasia Far East Index inched ahead only 1.8%. In the previous year, it rose 12.67%.
During that year ended March 31, 1996, the top 50 international and global firms saw their U.S. institutional assets rise 27.4% to $357.3 billion and the top 125 firms posted a 26% growth to $400.084 billion under management.
For the year ended Dec. 31, U.S. tax-exempt institutions put a net $50 billion into cross-border assets, a record amount in dollar terms, according to InterSec Research Corp., Stamford, Conn. The previous record of $41 billion was set in 1993, said Jim Waterman, InterSec's senior vice president.
Factors feeding the recent international asset growth include: continued rebalancing of portfolios in light of the surge in the U.S. market; some growing concern about the level of the U.S. stock market; and more appeal of hoped-for outperforming investments, such as emerging markets. Indeed, of the $50 billion net cash inflow to international last year, $47 billion went to equities generally, of which fully $10 billion was allotted to emerging markets, InterSec's data show.
Consultant RogersCasey, Darien, Conn., has been engaged in four client searches this year for emerging markets managers -more than occurred in all of 1996 for the firm, said Mathew Jensen, international research director. That development fits into broader trends that are influenced by the U.S. market's run-up. As plan sponsors rebalance their portfolios because of the run-up, they have more money to invest in other areas seen as having value. Within international, more are considering emerging markets, international small-capitalization stocks and even "active-EAFE" assignments, said Mr. Jensen. (The latter are mandates that can take sizable country or company bets away from a benchmark.)
Of course, many pension funds also have been increasing their allocation to existing managers and accounts. That trend proved to be a boon for Barclays Global Investors, San Francisco - the firm that gained the most international/global assets from U.S. institutions.
In the year ended March 31, BGI posted a whopping $12.18 billion rise to $38.9 billion in international/global assets under management from U.S. tax-exempt clients. Patricia Dunn, Barclays' co-chair, cited three sources of the inflow: allocations to international index funds from new and existing clients; allocations to enhanced index strategies; and investments in active strategies. But the largest chunk of the $12 billion inflow represented contributions to international index funds from existing clients, she said.
But BGI's quantitative active strategies also were hot. Ms. Dunn said about one-third of the inflow to international went into that category, making it "our biggest-ever year for that."
Among the other top three firms, State Street Global Advisors, Boston, drew in an additional $4.8 billion of international/global assets to $43.47 billion from U.S. tax-exempt clients, leaving it as the top-ranked in this category. Los Angeles-based Capital Guardian Trust Co.'s $7.3 billion gain helped it retain its third-place slot, with a total of $30.5 billion.
In the list of the largest 10 managers, the reported assets of Morgan Stanley Asset Management, New York, are the only glaring change. For the year ended March 31, MSAM's reported $29.96 billion of international/global assets under management stood $20 billion higher that last year's total, which catapults it into fourth place from 11th in terms of assets in this category. An official at the firm said MSAM's international/global assets had been underreported in past years.
The only other changes among the top 10 were Rowe Price-Fleming International Inc., Baltimore, which slid to 11th place from ninth, and Scudder, Stevens & Clark Inc., New York, which slipped to 10th from eighth.
Among the top 20 players, Lazard Asset Management, New York, attracted an additional $3.02 billion of international/global assets for a total of $8.05 billion; Putnam Investments, Boston, drew in $2.9 billion to $10.18 billion; and Bank of Ireland Asset Management (U.S.) Ltd., Greenwich, Conn., also attracted nearly $3 billion of international/global assets from U.S. tax-exempt institutions for a total of $7.76 billion.
Thomas Lucey, Putnam's senior managing director and chief of institutional management, said that of his firm's nearly $3 billion gain, about 60% came from defined benefit funds, with 40% from defined contribution plans. Putnam obtained fully 80% of its new defined benefit international/global assets from new clients. Mr. Lucey partly attributed this in part to clients playing catch-up in international allocations after the distraction of the U.S. market's surge. And another part - just more than 20% - came from new global asset allocation accounts.
In the defined contribution area, he said two-thirds of the assets were from asset allocation lifecycle funds.
The $3 billion increase for Lazard Asset came about 50% from existing clients and about 50% from new ones, said Managing Director Larry Kohn. He said the bulk of the money went into Lazard's core EAFE product, with lesser amounts targeted to global equities and emerging markets.
Among the top 20 firms, only Prudential Insurance Co. of America Inc., Newark, N.J., showed a loss of international/global assets under management from tax-exempt institutions. versus last year. Prudential's data show a $709 million drop to $7.991 billion of global/international assets from tax-exempt institutions.
However, several firms that had been in the top 50 last year showed international/global asset declines for the year ended March 31. With a loss of $1.26 billion, U.S. institutional assets of Emerging Markets Investors Corp., Arlington, Va., dropped to $1.524 billion. In addition, BEA Associates reported a drop of $868.8 million to nearly $2.247 million. (A BEA spokeswoman explained that last year's total included assets from foreign offices of Credit Suisse Asset Management, of which BEA is a unit; this year, BEA only included international/global assets from its New York office in its total.)
Moreover, Nomura Capital Management Inc., New York, posted a $627 million drop to $3.813 billion of international/global assets, while Fiduciary Trust Co. International, New York, lost $234 million to $4.561 billion, and Miller Anderson & Sherrerd, West Conshohocken, Pa., reported a drop of $144 million to $2.495 billion. Wright Investors' Service, Bridgeport, Conn. showed a drop of $1 billion in assets to $815 million. But a company spokeswoman said no asset loss actually had occurred; instead, the firm had included globally invested assets in balanced accounts.
In this year's survey, Pensions & Investments also asked firms about their non-U.S. clients. Specific questions included: how much they manage for non-U.S. institutional clients in U.S. markets; and, how much of their pension assets under management come from foreign clients. The responses showed that, collectively, managers in this survey had substantial amounts in both categories.
As of March 31, the 50 largest managers had $153 billion invested in the United States for foreign clients. And an even larger $536.8 billion was being handled by the 50 largest managers (in this survey) of non-U.S. pension assets.