LONDON — Money managers already under the gun from U.S. federal and state investigations into alleged trading abuses are feeling the heat overseas as well.
"I think the pressure is on a number of American managers. Alliance Capital is one where there is client concern as well," said Andrew Drake, a consultant with Punter Southall & Co., London, a British asset consulting firm.
"They (plan sponsors) are reading about American schemes — especially big, influential funds like CalPERS — taking action, and they're wondering if it's prudent action for them to do the same," he said.
In London, Stephen Cohen, European institutional business head for Putnam, confirmed that institutional clients there had already started terminating the firm from international equity mandates.
John Boneparth, senior managing director and head of international business at Putnam in Boston, said losses to date amounted to just 1% of Putnam's assets sourced from non-U.S. investors. "I don't expect to lose a lot more, either. Clients usually act pretty fast on this sort of thing," Mr. Boneparth said in a telephone interview.
He declined to reveal exact figures on how much the firm manages in institutional assets outside the United States, or how much those numbers have fallen in recent weeks. (According to a survey the firm filled out for Pensions & Investments, as of year-end 2002, 4% of its then-$314.6 billion in total worldwide assets was invested for clients in the United Kingdom and Europe; 3% was in Asia and Japan.)
A spokesman for the £2.2 billion ($3.75 billion) Lothian Pension Fund, Edinburgh, said: "We are concerned about the SEC action, but Putnam's contract is due for renewal in December anyway, so we won't be taking action until then. We have decided to go out for a full tender next year." Putnam manages £38.8 million in active growth U.S. equities for the plan.
Putnam also manages €180 million in active international equities for the £5 billion West Midlands Metropolitan Authorities Pension Scheme, Wolverhampton, England. "We are taking advice on the matter from our consultants," a pension fund spokeswoman said. "Other than saying that, we have no further comment at this stage."
In Australia, where Putnam Investments manages A$5 billion (US$3.61 billion) in international equities under an exclusive subadvisory arrangement with BT Financial Group Ltd., Sydney, a local source confirmed executives there were following the U.S. situation closely. BT Financial, fully owned by Westpac Banking Corp. Ltd., Sydney, will consider ending the arrangement if the situation grows worse, said the source, who did not wish to be identified.
Alliance also is being watched by clients. Last week, the €144 billion ($171.6 billion) Stichting Pensioenfonds ABP, Heerlen, the Netherlands, Europe's biggest pension plan, released a statement saying it had put Alliance Capital on watch over the securities trading scandal. Alliance manages an active international equity portfolio of undetermined size for ABP.
Another Alliance client, the VKG/CPM, Brussels, a €620 million industrywide scheme for Belgian doctors and dentists, is also wary of the situation.
David Steyn, director of Europe, Middle East and Africa for AllianceBernstein Ltd., London, did not return telephone calls seeking comment on either client. Calls placed to Alliance's New York-based CIO Lew Sanders and spokesman John Meyers also were not returned.
Putnam's Mr. Boneparth said clients outside the United States were fitting into one of three categories: those paying no attention to the goings on; those following the situation and keeping a close watch; and those that have already terminated.
"The vast majority are in category two. There is no direct effect for international institutional Putnam clients whatsoever," Mr. Boneparth said. The clients that have terminated to date have typically been the European affiliates of U.S. multinational corporations, he added.
"The scheme in the U.S. will terminate, and so the affiliates outside the U.S. will follow suit in order to maintain consistency," he said.