New international mandates from U.S. tax-exempt investors declined for the third consecutive year in 2002, but two money managers entered the top 10 list of managers winning new mandates, according to a report from InterSec Research Corp., Stamford, Conn.
In total, some $27 billion in new mandates were awarded last year, less than half of what was handed out in 2001. The report blamed part of the decline on institutional investors undertaking asset-liability studies, which slowed the process of replacing managers.
Lisa Jones, head of the institutional division at MFS, said executives attempted to "make the case for international investing" through road shows in four cities last year, meeting with consultants and potential clients. She said the firm's core strategy has a bit of a growth bias; it is benchmarked to the Morgan Stanley Capital International Europe Australasia Far East index.
"We had our best new business year in 2002," said Michelle Seitz, head of the investment management group at William Blair. Three of the new international mandates Blair won: $300 million from the $12.9 billion Illinois Municipal Retirement Fund, Oak Brook; $50 million from the City of San Jose (Calif.) Retirement Fund; and $37 million from the Detroit Medical Center.
The $38 billion Pennsylvania Public School Employees' Retirement System, Harrisburg, gave out four international mandates, worth a total of about $3 billion, in 2002. All four managers were reportedly among the top 10 firms in InterSec's survey: The Boston Co. Asset Management LLC, Boston; Mercator Asset Management LP, Fort Lauderdale, Fla.; Bank of Ireland Asset Management (U.S.) Ltd., Greenwich, Conn.; and Baillie GiBoston Co. Asset Management LLC, Boston; Mercator Asset Management LP, Fort Lauderdale, Fla.; Bank of Ireland Asset Management (U.S.) Ltd., Greenwich, Conn.; and Baillie Gifford Overseas Ltd., Edinburgh.
Richard Qiu, research analyst at InterSec, would not name the other firms in the top 10.
The InterSec survey only measures the number of new mandates awarded. It does not count mandates that money management firms lost.
The survey also reported that total U.S. tax-exempt international assets fell to $629 billion at the end of 2002, down almost 11%, or $76 billion, from the previous year.
Global equity falls off
InterSec's report attributed most of the drop to the decline in global equity markets. At year-end 2002, international investment accounted for 11.9% of U.S. pension assets, rising slightly from 11.8% of pension assets in 2001, according to the report.
The report also predicted that total international assets will surpass $1 trillion by 2007, representing 12.7% of total U.S. pension assets.
According to the report, there was a net withdrawal - of $7 billion - from international investments by U.S. pension funds, the first net withdrawal since InterSec started collecting data in 1992.
There were 299 new international mandates awarded in 2002, down from 345 in 2001. About $25 billion of the $27 billion in new mandates was for active international equity.
Among international equity managers, value managers attracted larger inflows, - more than $6 billion - because of their superior recent performance. But the report noted: "There was still a good mix of growth, value and core managers."