LONDON -- Money manager Payden & Rygel plans to tap the growing European market for cash management and global bond products now that it has set up shop in London.
Cash management is still a relatively underdeveloped business in Europe as interest rates across the region have started to fall only in the past couple of years, said Robin Creswell, managing director at Payden & Rygel Global Ltd., London.
Most cash management services in Europe are focused on short-term funds and the group hopes to attract business using money market strategies based on medium- to long-term instruments that give returns at least 70 basis points higher than those in the short-term market, said John Siciliano, managing director at Payden & Rygel, Los Angeles.
Interest in high-yield bond strategies is small but increasing as the corporate debt market grows in Europe, and the group plans to develop this business in Britain, said Mr. Creswell.
The group also hopes to build a market for its enhanced equity strategies among institutions increasingly interested in plain vanilla index tracking funds. Returns from traditional index tracking funds are barely higher than those for the underlying index and often are eroded by management fees, said Mr. Creswell. With an enhanced strategy, an institution gains cheap exposure to an equity index through buying options, while the cash left over is invested in medium- to long-term bonds to provide enhanced returns.
The U.K. investment watchdog Investment Management Regulatory Organization last month gave Payden & Rygel official approval to market its services in the United Kingdom. Target markets include U.K.-based local authorities that are diversifying their pension plans' investment strategies and looking for external managers.
The group will use the London office to build new business in Europe as well as serve the international needs of some of its U.S.-based multinational clients, which include The Walt Disney Co., Burbank, Calif.; American Airlines Inc., Dallas; and Texaco Inc., White Plains, N.Y.
The London office will work in cooperation with the joint venture established last year between Payden & Rygel and private investment bank Metzler Bank, Frankfurt, Germany.