Fidelity Investments, long the biggest American money manager, now leads the world.
A combination of slipping assets and a 14% drop in the Swiss franc vs. the U.S. dollar knocked UBS AG off its pedestal as the world's biggest money manager in 1999, according to the annual survey by Pensions & Investments and Watson Wyatt Worldwide.
These factors, combined with a big jump by Fidelity, enabled the Boston-based giant to reach $1.07 trillion in assets, slipping past UBS at $1.06 trillion.
"Growth in assets under management of 37% is enormous for a giant like Fidelity," said Philip Robinson, head of research for the global asset study at Watson Wyatt Worldwide, Reigate, England.
Total assets managed by the world's 500 largest money managers increased by 15% to $33.6 trillion in 1999.
But many firms dramatically outpaced this level of growth as a result of mergers and acquisitions last year. Other firms trying to integrate acquisitions from 1998 and early 1999 saw assets tumble in 1999 as manager changes and departures left clients heading for the exits.
At least 35 managers vanished from the rankings between 1998 and 1999 as a result of mergers, reflecting the growing maturity of the asset management business, said Mr. Robinson. Independent mid-sized asset managers were being squeezed by falling management fees combined with increased regulatory and administrative costs and the demand for greater investment in information technology.
But money managers have been fortunate that asset valuations have continued to rise in the current environment of rising costs. Mergers and acquisitions could accelerate if global investment markets were to go through a correction, he warned.
Fidelity Investments secured the top slot because of strong market growth, increased activity in the group's defined contribution and 401(k)-related business, and diversity of investment products, said Robert Reynolds, Fidelity's chief operating officer. "If either growth- or value-oriented products are in favor, we have a product," he added.
Market volatility and poor performance from bonds meant firms were doing well if they managed to grow assets under management by more than 10% during 1999, Mr. Reynolds said.
Victim of value
Meanwhile, Zurich-based UBS was a victim of the disfavor of value equity investing and by the style's poor performance, slipping by $80 billion despite its September 1999 acquisition of independent fund-of-funds manager Global Asset Management. GAM had reported $13.6 billion in assets under management as of year-end 1998. UBS included advisory assets in its total.
But UBS was not alone; most of the largest Swiss money managers slipped in the rankings between year-end 1998 and 1999.
A large part of UBS' 7% year-on-year fall in assets under management no doubt was the result of declining business at subsidiaries Phillips & Drew Ltd., London, and Brinson Partners, Chicago.
UBS' Swiss counterparts also suffered during 1999. "Large Swiss managers are without a doubt losing market share among domestic institutions, and manager selections increasingly include foreign money managers," said Mr. Robinson.
Credit Suisse Group, Zurich, for example, saw a marked slide in assets under management to $560 billion as of Dec. 31 from $680 billion on Dec. 31, 1998, dropping it five slots to No. 9. That total includes advisory assets.
Smaller Swiss money managers, however, picked up new business at the expense of the large Swiss institutions. Lombard Odier Inc. and Julius Baer Investment Management Inc., both in New York, inched up in terms of assets under management, with gains of 12.9% and 12%, respectively.
Passive equity managers also fared well for the year. Indexed asset managers Barclays PLC, London, and State Street Global Advisors, Boston, each moved up a slot from 1998, ranking fifth and sixth, respectively, by the end of last year.
Passive mandates now represent around 19% of total assets under management among the world's 500 biggest money managers, compared with around 15% in 1998, said Mr. Robinson.
Passive manager Legal & General Investment Management Ltd., London, also benefited from increased demand for such mandates, moving up six slots to 51st, following a 28% rise in assets under management to $169 billion.
Acquisitions on the rise
Many of the firms with substantial gains in 1999 saw their assets grow as the result of acquisitions.
Banco Bilbao Vizcaya, Madrid, and Deutsche Bank AG, Frankfurt,
for example, saw assets under management jump 199% and 134%, respectively, as a result of acquisitions.
BBV spent much of 1999 on the acquisition trail, merging with Argentaria SA, Madrid, to form Banco Bilbao Vizcaya Argentaria; and snapped up Corporacion Bancaria de Espana SA, Madrid, and Grupo Financiero Bancomer, Mexico City. The deals catapulted BBV to No. 89 with $103 billion under management. In 1998's rankings, the firm weighed in 169th with assets under management of $34 billion.
Deutsche's acquisition of Bankers Trust Co, New York, took effect in 1999, bumping the group to seventh place with assets under management of $589 billion. In 1998, Deutsche ranked No. 27 with assets of $252 billion; and Bankers Trust was 13th with $361 billion in assets under management, meaning the combined figure represented a 4% decline.
Lloyds TSB, London, also saw assets manage decline after the mid-1999 announcement it would merge subsidiaries Scottish Widows Investment Management Ltd., Edinburgh, and Hill Samuel Asset Management, London, a change that took effect this year. The announcement led to considerable changes in personnel at both Hill Samuel and Scottish Widows, and both started losing mandates soon after the announcement.
With Hill Samuel focused on internal restructuring, Lloyds slipped to No. 98 from No. 72 in 1998. Assets under management fell 9% to $93 billion by the end of 1999. But Scottish Widows grew 9% during the year to $59 billion.
"This is where it is so important to have a proper integration strategy," said Mr. Robinson.
In contrast, some large independents such as Fidelity; The Capital Group Cos. Inc., Los Angeles, which saw assets under management increase 28%; and Baillie Gifford & Co., Edinburgh, which grew by 43%, were able to strengthen their positions simply through organic growth.
These firms' attractiveness to clients and increase in funds under management likely lay in their relative internal stability, said Mr. Robinson.
"If you have a good brand name and are a clearly independent money manager that is not undergoing internal change, then you are going to do well," he said.
But mergers and acquisitions thinned the ranks of medium-sized independent firms that were particularly vulnerable to takeover, Mr. Robinson said.
The acquisition of independent firm Stewart Ivory & Co. Ltd., Edinburgh, helped send Colonial Ltd., Melbourne, Australia, skittering up the rankings to 134th place from No. 259 in 1998, with $57.4 billion under management, a 178% increase over the firms' 1998 totals.
AXA SA, Paris, moved up one position to fourth after acquiring Guardian Royal Exchange Group, London. AXA reported a 17% increase in assets over the amount reported by the two firms as of year-end 1998.
Prudential PLC, London, moved to 28th from 35th place in 1998 following its acquisition of M&G Investment Management Ltd., London. Prudential gained 10% over the combined assets the two firms reported in 1998.
Newly formed Chuo Mitsui Trust and Banking, Tokyo, ranked 27th with $272 billion in assets under management as of March 31.
Changes in Japan
Last year saw a considerable shake-up in the Japanese money management industry through mergers and acquisitions; and a closer scrutiny of many of the groups' figures led to a shake-up in the rankings.
The Japanese assets may have been flattered by the relative strength of the yen against the dollar during 1999. The yen strengthened by 10% against the dollar between Dec. 31, 1998, and Dec. 31, 1999.
Japan's largest money manager, Nippon Life Insurance Co., Osaka, slipped 2% to 21st place with assets under management of $347 billion in 1999, from 15th in 1998, as foreign competition eroded market share. Zenkyoren, Tokyo, similarly slipped 1% to $276 billion, falling to 26th position from 22nd in 1998.
A number of large Anglo-American money managers were able to secure market share at the expense of local money managers, and almost one-third of new mandates from Japanese institutions went to non-domestic managers last year. "Unlike in many other markets, a foreign brand name is a positive advantage in Japan," said Mr. Robinson. "This is a market that is changing more than any other."