LONDON -- Build it or buy it: what's the best strategy for gaining pension fund clients across Europe?
Based on data compiled by consultant William M. Mercer Ltd., the quickest way to pick up the most clients is through consolidation.
"Acquisition clearly is still playing a major role in terms of growth that people are able to record," said Simon Hill, a senior consultant with Mercer Manager Advisory Services in London.
Dutch money managers certainly seized on that message: among the biggest gainers of European pension fund segregated business during the 12-month period ended June 30, ING Investment Management, Robeco Institutional Asset Management and Achmea Global Investors all picked up major gains through acquisitions.
The Hague-based ING is a case in point. Of the 100 new mandates it picked up during that time, 74 came from the purchase of Brussels-based BBL Capital Management. That acquisition provided ING with 65 new Belgian mandates and nine new Finnish mandates.
Still, ING was no slacker during that stretch, picking up 26 new segregated pension mandates on its own, including 14 in Holland, five each in Spain and Hungary and one a piece in Italy and the Czech Republic.
Martin Nijkamp, director institutional clients international, said ING's policy is to pick up clients through acquisitions or local marketing. ING's segregated pension assets under management grew to $22.4 billion from $16.9 billion.
(The Mercer data track only segregated pension assets, and thus do not reflect firms' total assets under management. Many European pension funds prefer pooled pension vehicles, while indexed portfolios also tend to be pooled.)
Meanwhile, second-ranking Robeco Institutional Asset Management, Rotterdam, won nearly all of its client gains through consolidation with other Dutch financial firms.
In 1998, Robeco took over investment management of 41 pension mandates from Tilburg-based Interpolis, an insurer that is owned by Robeco's 50% owner, Rabobank. And the purchase of Groningen-based Beon Pensioen- en Vermogensbeheer resulted in another 24 mandates in early 1998, said Lorig Maranjian, marketing director for Robeco's London office.
1 purchase, 27 accounts
Similarly, Amsterdam-based Achmea gained nearly all of its 27 new segregated pension mandates from its acquisition of PVF Pensioenen, Amsterdam, said Leo Osseweijer, director of investment management.
However, "organic growth still is the principal driver" of manager gains, Mr. Hill said. Managers "have got there through careful and thorough growth over a number of years. It's not instant success."
Geneva-based Lombard Odier & Cie picked up nearly $4 billion in pension accounts in 1998, said Jean Keller, head of institutional marketing in the firm's London office.
Most of the assets came from British, Dutch and Swiss pension funds, plus a couple of mandates from French-domiciled international organizations, he said.
The British accounts included mostly European equity and U.K. equity mandates, a real tribute because British funds rarely have awarded domestic equity mandates to foreign managers.
U.K. market opening
There are further signs the U.K. pension market is beginning to open up to foreign managers.
Fidelity Pensions Management, London, recorded virtually all of its 21 segregated pension account gains in the 12 months ended June 30 from British pension funds. Fidelity achieved its greatest success in the toughest area to penetrate: global balanced and U.K. equity mandates, both of which rely on strong U.K. equity performance.
Global balanced accounts -- or multiasset, as they increasingly are called -- remain at the heart of most U.K. pension fund strategies.
"It's still at the core of the U.K. market, although we are seeing a trend toward specialist (accounts), especially among major funds," said Anna Roads, a director at Fidelity.
Morgan Grenfell Asset Management, London, has benefited from "a very disciplined investment process, which has led to consistently strong investment performance over the last five years," said James Goulding, head of the firm's U.K./Europe division. The result is 35 net new pension clients, mostly U.K. funds, at a time when its major competitors have been lagging.
Some markets remain largely the province of local managers.
Metzler Group, Frankfurt, picked up a net of 16 German institutional clients during the 12 months ended June 30, largely spread across European balanced, stock and bond mandates, said Bernd Baur, partner and chief investment officer.
But what's not shown in the data, Mercer's Mr. Hill added, are "the profits...the quality...and the prospects of the business."