LONDON -- Principal Financial Group, Des Moines, Iowa, hopes to ride the wave of increased demand from European pension plans for corporate bonds and specialist asset managers.
Its money management arm, Principal Capital Management, recently received approval from the U.K. investment regulator and last month opened a sales and marketing office in London. The firm hopes to use its London base as a springboard into the European pension market, said Kirk West, managing director for Principal Capital Management (Europe) Ltd., London.
Principal Capital Management has a European client base accounting for roughly $200 million of the firm's $106 billion dollars in assets under management. Mr. West hopes to boost the European client assets to around $1 billion over the next two years.
The London office will market actively managed investment products from Principal money managers in Des Moines and Sydney, where the firm last year bought BT Funds Management following the acquisition of Bankers Trust, New York, by Deutsche Bank AG, Frankfurt, Germany.
Global corporate bonds, emerging market equities and international small-cap stocks will be managed from Des Moines.
European mandates for Asian, European and global equities will be run from Sydney.
Rather than foist the entire product range on the market, Principal executives attempted to pick out products that stood out on selection lists as being in high demand, said Dennis Francis, chief executive officer of Principal Capital Management LLC. By offering specific investment products he hoped the London office would take advantage of the marked shift by U.K. plan sponsors away from balanced mandates to using specialist money managers and plan-specific benchmarks.
Over the long term the group plans to market the retirement administration services of the Principal Group, said Mr. Francis.
Principal currently administers 44,000 401(k) plans in the United States and a decision was made roughly two years ago to expand this business globally, he said. The group hopes to be able to take advantage of increased demand for defined contribution plans with the expected launch next year of legislation that will force most British companies to give pensions to employees.
"We believe there will be a significant move over the next 10 years to the use of 401(k)-type plans in the U.K.," he added.
The firm does not plan to set up an asset management capability in London, said Christopher Selth, executive vice president BT Funds Management.
"In Australia we are an employer of choice. If we set up in London we would be competing for staff against other international banks," he said. It is also a lot easier to maintain and control the bottom-up investment process if the fund managers are all under one roof, he added.