“Obviously that rate of growth was unsustainable,” said Carter Lyons, client relationship officer at Barclays Global Investors, San Francisco. The strong rate of growth was helped by booming international equity markets that bolstered returns in previous years and investors’ continued move into more international asset class, he said.
In the U.S., investors began to rebalance their portfolios as overseas assets swelled on the backs of strong returns, said Brendan Cooper, head of analytics at InterSec Research, Boston. According to InterSec data, U.S. investors pulled at least $44 billion from international and global mandates during calendar 2007 and another $13 billion from emerging markets portfolios.
“This is the first year we’ve seen significant outflows from international equity in at least 15 years,” said Mr. Cooper. “What we saw in 2007 was some rebalancing going on.”
But equity markets across the world were rocked by the credit crunch in mid-2007. Managers were particularly hurt by the steep declines in the international and domestic markets in the first quarter of 2008.
For the quarter ended March 31, the Morgan Stanley Capital International Europe Australasia Far East index was down 8.9%, while the Standard and Poor’s 500 index was down 9.5%. For the year ended March 31, the EAFE fell 2.7% while the S&P 500 fell 5.1%.
BGI and State Street Global Advisors, Boston, hung on to their respective first and second-place slots. BGI had $828.6 billion in assets, up 13%, while SSgA’s $724.9 billion was an increase of 14%.
Among the top 10 managers, BNY Mellon Asset Management assets dropped 9.3% to $273 billion, while UBS Global Asset Management’s assets dropped 3.5% to $246.7 billion. BNY Mellon is the sixth largest manager and UBS is the ninth. (Mellon Financial Corp. and BNY Asset Management merged in mid-2007. In last year’s survey, Mellon reported $298.2 billion and BNY, $3 billion.)
The decline in assets at BNY Mellon came when the majority of the international team at subsidiary The Boston Co. Asset Management left to join Munder Capital Management, Birmingham, Mich., said Mike Dunn, spokesman. Some losses were offset by inflows into the international strategies run by other subsidiaries, he said.
Officials at both BNY and UBS said the weak equity markets, particularly in the first quarter of this year, dampened growth.
Kris Kagel, spokesman at UBS, said: “UBS Global Asset Management's assets have been affected by this factor and also by net client outflows as a result of poor performance in some equity and fixed income strategies.”
Rounding out the top 10 were: AllianceBernstein LP, New York, $322.2 billion; Legg Mason Inc., Baltimore, $291.1 billion; AIG Investments, New York, $273.8 billion; Pacific Investment Management Co, Newport Beach, Calif., $250 billion; Fidelity Investments, Boston, $247 billion, and Deutsche Asset Management, New York, $240.1 billion.
There was even less growth among assets managed for U.S. tax-exempt institutions. Managers had $2.3 trillion in international and global mandates for U.S. tax-exempt institutional investors, nearly flat from $2.1 trillion last year.
The top three managers of overseas mandates for U.S. tax-exempt clients held the same positions from a year earlier: BGI, $176.5 billion; SSgA, $168.9 billion; and BNY Mellon, $125.1 billion.
They were followed by Fidelity, $101.7 billion; Northern Trust Global Investments, Chicago, $89.3 billion; Grantham, Mayo, van Otterloo & Co. LLC, Boston, $64.5 billion; AllianceBernstein, $84.4 billion; TIAA-CREF, New York, $78.1 billion; Bridgewater Associates Inc., Westport, Conn., $68 billion; and Capital Guardian Trust Co., Los Angeles, $63.6 billion.
“From March (2007) to March (2008), we’ve had one of the most skittish markets we’ve had in years,” said Mr. Lyons. As a result, some U.S. investors are sitting on their assets, he said.
Overall, BGI benefited from the continuing trend of clients moving to strategically gain exposure to overseas markets and move away from their home country bias, said Mr. Carter. The firm also saw growth in its emerging markets and frontier market strategies, he said.
SSgA benefited from interest in higher alpha strategies, as well as non-U.S. passive strategies.
“We still continued to have good growth because demand for 130/30 and long/short remain pretty strong,” said Scott Powers, chief executive at SSgA.
The firm also saw growth from relationships with sovereign wealth funds, he said. “They definitely look at more global assets,” said Mr. Powers.
Companywide during 2007, the firm’s assets grew 13% to $1.98 trillion. Some 40% of net new business came from outside the U.S., said Mr. Powers.
Contact Raquel Pichardo at [email protected]
