WATERLOO, Belgium — Vanguard Investments Europe SA tripled its business in the continent over the past two years, with assets expected to hit $15.5 billion on the continent by Dec. 31.
And while the European arm of Valley Forge, Pa.-based Vanguard Group Inc. accounts for less than 2% of the $880 billion in total assets managed by the firm, it's seen as key to the firm's overall institutional business growth.
"That's still a small figure, but Europe is obviously growing at a more rapid pace (than the United States)," said Shellie Unger, Vanguard managing director for Europe. "We're hoping to continue with that success by doing really more of the same."
In Europe, the fund manager's business focuses on institutional clients, mostly pension plans. Vanguard's strategy has been to establish a local presence by securing high-profile pension plans to attract other clients in the region. The firm's entry in the French market largely centered on clinching two mandates in 2004 worth a combined €1.64 billion ($1.9 billion) from the €19.6 billion Fonds de Reserve pour les Retraites, Paris.
The French government launched FRR in 1999 to cover expected shortfalls in the country's pay-as-you-go pension system, partly due to an overall trend in longer life expectancy and an aging population. Following a recommendation by the Paris staff of Mercer Investment Consulting, FRR hired Vanguard to run €1 billion in passive eurozone large-cap equities and €640 million in passive U.S. large-cap equities (Pensions & Investments, June 13).
"Vanguard was almost unknown in France before that," said Frederic Lorenzini, director of research for Morningstar France, Paris. "What the FRR mandate did was that it established credibility for Vanguard in France."
Vanguard, which solidified its footprint in France by opening a Paris office earlier this year, had $4 billion under management on behalf of French institutional investors as of Sept. 30.
"One of the most pleasing things about the way we've grown (in Europe) is that our clients are fantastically balanced," Ms. Unger said. "There's not one gigantic client and one geographic region."