LONDON -- As SEI waves goodbye to the last traces of its consulting business with the sale of Funds Evaluation Trust, it has its sights firmly set on expanding its international asset management operations.
It is eight years since SEI launched its multimanager business in the United States, and the firm now is on the brink of creating a global network with operations in Europe and Asia.
By the end of March, SEI had $67.9 billion in assets under management from its multimanager business. Business from non-U.S. clients represents between $5 billion and $6 billion, or just about 8% of total assets, said Carl Guarino, managing director of SEI's global unit, which is based in the Oaks , Pa., head office.
The firm's nearest rival -- Frank Russell Co., Tacoma, Wash. -- had $60 billion in total assets under management, of which $12.6 billion comes from non-U.S. clients, according to a company spokesman.
Mr. Guarino expects the most growth in non-U.S. business for the next five years to come from Europe, where the firm has spent the past 12 months building a marketing and investment management presence.
Last month, SEI opened a London office in an attempt to win business from U.K. plan sponsors. Later this year it formally will launch its joint venture with Credit Commercial de France, Paris.
SEI's Karl Dasher will move from Oaks to Paris to jointly head SEI CCF Investments, Paris, with Didier Bouchard of CCF. Mr. Dasher until late last year had been in charge of the group's South African business, which in the past three years brought in around $1 billion in new mandates from domestic pension plans.
Within the last year the firm also launched a joint venture with Mediolanum SPA, Milan, to sell its multimanager funds to the Italian bank's client base of largely high-net-worth individuals. This deal already has brought in $2.5 billion in assets under management.
Including $1 billion in assets from the firm's Dublin-registered funds, SEI has $3.5 billion in assets under management in Europe, said Mr. Guarino.
And in Asia, the firm plans to further strengthen its business by adding investment professionals in its Hong Kong office. At this stage, the Hong Kong office is a representative office run by Vincent Chu, managing director, Asian region.
SEI also hopes to open an office in Japan by the end of this year and is looking for a partner to enable it to enter the market through either a joint venture or alliance.
The expansion of the global operations is costing the firm, however.
Operating losses for the first quarter of 2000 were $2.9 million, compared with $1.9 million for the first quarter of 1999, according to company accounts. And during the first quarter of this year investments in new business, mostly in Asia and Europe, jumped 125% to $8.5 million from $3.8 million for the first quarter of 1999.
Mr. Guarino said the firm has been able to fund its expansion from existing cash flow, as it remains well capitalized. Undoubtedly the recent three-for-one share split will give the firm greater capital raising resources, but that was not the intention of the deal, he said. Rather the firm hoped the share split would make its shares more tradable and improve liquidity in the stock, he said.
In the absence of a well-developed institutional investor base in continental Europe, SEI will focus initially on building a client base in the United Kingdom.
"In Europe the pensions market is at a very early stage and growth is somewhat slow," said Mr. Guarino.
The London operation plans to capitalize on U.K. plan sponsors' growing frustration with balanced money managers in order to market its multimanager approach, said Simon Ewan, head of U.K. sales.
A recent survey by SEI of 100 U.K.-based plan sponsors and trustees showed just less than half were dissatisfied with the advice they received from investment consultants, and 87% of respondents said it was difficult for lay-trustees to judge future performance when hiring managers. Just over 60% of those surveyed were dissatisfied with the time taken to hire and fire trustees.
The London office will be the first operation outside the Oaks headquarters to house a manager research team. The firm last year transferred Greg Stahl from the head office to London to head up the investment management team. The firm also recruited David McFadzean from the IBM United Kingdom Ltd. Pension Plan as an investment analyst.
A list of managers for the U.K. multimanager strategies will be released at the end of June, said Mr. Stahl.
The firm also plans to launch asset-liability modeling and back-office administration services in the United Kingdom during the next 12 months, said Mr. Ewan.
The relative maturity of the U.K. pensions market does not mean European opportunities will be completely ignored, however, and the firm has identified a market for multimanager strategies among mutual fund companies and high-net-worth investors.
"I think the (continental European) market is ready for the introduction of the multimanager concept, but it depends on the market segment you are looking at. The prospect for multimanager products from a market share point of view could be greater in continental Europe than in the U.K., but how large the continental European pension fund market will grow in the short-term is questionable," said Mr. Guarino.
The French joint venture is due to launch during the last quarter of this year and will market its multimanager services to local insurance companies and mutual fund firms, as only a very limited formal pensions market exists in France. SEI is in the process of hiring investment analysts as well as administration staff for the business.
"We will leverage off the expertise in the U.S., but we feel it is important to have expert professionals on the ground due to the work we do with clients in terms of asset allocation," said Mr. Guarino.
The intention is not to create a stand-alone investment operation in Paris but to ensure that the French team works with the investment group based in Oaks to create a "single cohesive investment platform," he added.
"There is clearly a growing global convergence in terms of what different people need, but there is a lot that lies in between this in terms of local market preferences and regulatory arrangements."
Mr. Guarino joined SEI in 1988 and was appointed to lead the firm's push into international markets in 1995.
He is unwilling to predict how quickly the international business is likely to grow. It took roughly three years for the marketing efforts of the U.S. multimanager business to translate into a steady flow of mandates. "We hope in Europe it will not take as long," he said.