ROTTERDAM, The Netherlands - WANTED: Strategic stakes in U.S. and U.K. money managers, with between $4 billion and $8 billion in assets under management.
Unlike some money managers seeking to swallow up huge acquisitions, officials at Rotterdam-based Robeco Groep N.V. are content to build a global empire with much more modest bites.
Still, enough morsels add up to a substantial meal. Ruud Hendriks, head of institutional marketing for Europe (ex-Netherlands) and the United States, said Robeco officials would like to more than double assets under management to about $100 billion within a couple of years, from $47.7 billion at June 30.
A megadeal, such as Zurich Insurance's recent purchase of Scudder, Stevens & Clark, "is clearly a bridge too far (for Robeco)," Mr. Hendriks said.
What's more, Robeco officials want to avoid cultural conflicts and overlapping duties that arise from a merger of equals; they prefer building an asset management network of firms strongly committed to developing their business.
While Robeco is Holland's leading mutual fund company, it has a relatively minor presence overseas. Dutch investors account for about 80% of the firm's assets under management. Robeco officials would like to see this non-domestic portion grow substantially.
About 35% of Robeco's assets come from institutional investors. The firm is dominated by four global open-end publicly traded mutual funds: blue-chip stock fund Robeco; growth-stock fund Rolinco; global fixed-income Rorento; and real estate fund Rodamco.
February sale to Rabobank
The international expansion strategy ties into Robeco's decision last February to sell a 50% stake to Utrecht-based Rabobank Nederland, a leading Dutch cooperative bank, for 530 million guilders ($279 million).
Pieter Korteweg, chairman of Robeco Groep's executive committee, said in an earlier statement: "Our competitors are now global players. Relative size has become an important issue. Fund managers, if they want to continue and provide big international clients with the services they rightly demand, must keep pace with this growth and expand accordingly."
Rabobank has an option to buy the remaining half of the manager after four years for 585 million guilders, if either Robeco's assets under management reach 150 billion guilders or half of Robeco's assets have come through the bank.
Robeco will become the primary money manager for the bank, which also includes Interpolis, a Tilburg-based insurer with 19 billion guilders in assets. Robeco is expected to take on management of a substantial portion of Interpolis' assets.
Rabobank offers Robeco both retail distribution and a triple-A rating. Moreover, the bank will finance Robeco's international expansion, boosting the firm's cash hoard to between 1 billion and 1.5 billion guilders.
In turn, Robeco offers Rabobank a highly rated money management unit. The merger - which was preceded by cooperative efforts since 1990 - also anticipates shifting markets that will be influenced by European Economic and Monetary Union, slated for startup on Jan. 1, 1999.
Robeco and Rabobank officials say added financial clout is needed to play in the European market for institutional, corporate and private investors.
International expansion efforts
After taking a 40% stake in Houston-based bond manager Smith Graham & Co. last year, officials at the Dutch manager are seeking to take a strategic stake in an U.S.-based equity counterpart.
Robeco officials have commissioned RogersCasey & Associates Inc. to study the expected trends among U.S. institutional investors, including subjects such as international diversification, passive vs. active investment, and views on investing in Europe.
Meanwhile, J.P. Morgan & Co., New York, is trolling around for potential U.S. acquisitions.
In Great Britain, Robeco officials are looking for acquisitions roughly the same size as those they are seeking in the United States.
The firm is interviewing prospective investment bankers there. Robeco also has hired independent consultant Lorig Maranjian as its U.K. sales representative.
Robeco officials also are seeking investment bankers in France and Switzerland. The manager wants to expand its existing operations in those markets, either through acquisitions, partnerships or joint ventures. Germany is further down the list.
Domestic base shored up
Robeco also has beefed up its domestic base, acquiring Beon Pensioen- en Vermogensbeheer, a Groningen-based manager and third-party administrator to several Dutch industry pension schemes. The purchase price was not disclosed. Beon gives a 4 billion guilder boost to Robeco's assets under management as well as greater administrative capability.
Earlier discussions with PVF Nederland N.V., a much larger manager and administrator of Dutch industrywide schemes, were abandoned. Neither Robeco nor PVF wanted to give up investment management, "so we broke up as good friends," explained a PVF spokeswoman.
But observers said cultural issues also were involved, between Robeco's more aggressive style and PVF's non-profit-oriented milieu.
Industry experts add cultural differences also are a factor with Robeco's relations with Rabobank. Rabobank branch managers are nearly autonomous, akin to the local mayor, Dutch sources said.
While initially successful in pulling in retail assets, disillusionment set in after Robeco experienced weak performance a few years ago. Outsiders said some local branch managers stopped pushing Robeco products. What's more, experts said Robeco officials are perceived as being arrogant.
Mr. Hendriks said the manager and the bank enjoy a common culture. He added that Rabobank continues to sell Robeco mutual funds. But a quick check of three Rabobank branches in Amsterdam - including a major branch near the Amsterdam Stock Exchange - found little or no information about the Robeco funds.
Asking for brochures at a smaller branch, a reporter was told: "Oh dear, I have not seen that for some time. We are supposed to have them, but it's such a mess here .*.*. I will send them if I find them."
A Rabobank spokesman said some customers had transferred to savings accounts but now are returning to mutual funds as performance has rebounded.
The $6.38 billion Robeco fund beat the Morgan Stanley Capital International index by 590 basis points for the 12 months ended June 30, returning 28.7% in U.S. dollar terms. Three- and five-year numbers, however, still lag the index. Robeco's 2-year-old emerging markets fund also has been enjoying a strong period. After returning only 6.6% against the IFC Investable index's 10.8% for the 12 months ended June 30, 1996, the $230 million fund has racked up a spectacular 23.9% against the index's 13.2% return in the 12-month period ended June 30, 1997.
Meanwhile, the firm is expanding its product line. With the advent of a single European currency, Robeco has developed a bottom-up pan-European product. Already, the strategy has pulled in Swiss and Dutch clients, including the giant 260 billion guilder Stichting Pensioenfonds ABP, Heerlen.
Luuc van der Raaij contributed to this article