Skip to main content
pilogo-NEW
Subscribe
  • Subscribe
  • My Account
  • login
  • NEWS
    • Alternatives
    • Consultants
    • Defined Contribution
    • Frontlines
    • Hedge Funds
    • Investing / Portfolio Strategies
    • Money Management
    • Pension Funds
    • People Moves
    • Private Equity
    • Real Estate
    • Searches & Hires News
    • Special Reports
    • BlackFin closes third fund at €985 million, above its target
      Alerian acquires S-Network Global Indexes
      OMERS Ventures picks Uber veteran
      Neil Sheth
      More asset owners clamoring for multistrategy private credit
    • Mercer appoints global alternatives leader for wealth business
      KPMG offloads pension advisory unit to private equity firm
      Ascensus snaps up Nyhart in latest deal
      Willis Towers Watson exec promoted to lead retirement unit
    • Drew Carrington
      New data questions conventional wisdom
      Kathleen Long
      Plans enticing 401(k) savings even without employer contribution
      Joe Caldera
      Group acting to plug a gap in retirement
      Jean Young
      Analysis on stretching the match shows it doesn't work as intended
    • Ray Dalio book
      Dalio releases illustrated version of ‘Principles’ book
      Youngjae Ryu
      Korea Corporate Governance Forum set to debut Dec. 12
      MOney maze
      PLSA has tips for trustees of U.K. retirement funds
      Norm Champ
      Norm Champ shifts his focus to financial literacy in latest book
    • Macro hedge fund Stone Milliner shutting down
      James Medeiros
      Hedge fund managers are warming up to custom funds
      Louis Bacon
      Moore Capital's Louis Bacon to quit money management business
      James Yeh
      Citadel promotes James Yeh to president and co-CIO
    • CalPERS’ committee mulls new investment policies
      ESG worked in 2019, but questions remain for long term
      Wyoming investment board picks 2 for small-cap equities
      Pennsylvania Municipal Retirement looking for investment consultant
    • Mihir Worah
      PIMCO CIO for asset allocation and real assets to retire
      Icahn lays off workers as firm decamps to Miami
      Pacific Life hires head for new institutional arm
      1251 Capital acquires majority stake in Ziegler Capital
    • CalPERS’ committee mulls new investment policies
      Australian regulator lists underperforming funds
      PPF 7800 index funding deficit drops in November
      CDC, Laerernes commit to Amundi, EIB green bond program
    • Mihir Worah
      PIMCO CIO for asset allocation and real assets to retire
      OMERS Ventures picks Uber veteran
      Mercer appoints global alternatives leader for wealth business
      Apollo Global taps Bain Capital veteran to lead its Japan business
    • Parthenon Capital raises $2 billion with latest private equity fund
      Investindustrial raises €3.75 billion with seventh European buyout fund
      Sightway Capital closes first fund with $1.2 billion
      Private equity practices aired at House hearing
    • Schroders appoints real estate capital partners head
      CBRE acquires U.K. real estate debt investment business Laxfield Capital
      USAA to sell controlling interest in real estate unit
      Cold storage
      A hot time for those seeking the cold
    • Washington State Retirement hires Milliman as actuarial auditor
      Howard County allocates $7 million to venture capital
      Wisconsin deferred comp chooses Wilshire to analyze stable value options
      Illinois Teachers doles out $665 million to 5 alts managers
    • The best places to work in money management 2019
      Investment Consultants
      The 2019 Excellence & Innovation Awards
      Top-performing managers Q3 2019
  • Data
    • Research Center
    • Searches & Hires Database
    • Searches & Hires News
    • RFPs
    • Charts / Infographics
    • Sponsored Research
    • Trackers
    • Q3 2019 money manager M&A activity summary
      Q3 2019 legal overview report
      Q3 2019 searches and hires overview report
      P&I resources can give a leg up in winning new business
    • Washington State Retirement hires Milliman as actuarial auditor
      Howard County allocates $7 million to venture capital
      Wisconsin deferred comp chooses Wilshire to analyze stable value options
      Illinois Teachers doles out $665 million to 5 alts managers
    • Washington State Retirement hires Milliman as actuarial auditor
      Howard County allocates $7 million to venture capital
      Wisconsin deferred comp chooses Wilshire to analyze stable value options
      Illinois Teachers doles out $665 million to 5 alts managers
    • Transitional Manager Services
      457b DC PENSION PLAN
      Overlay and Passive Risk Balanced Investment Manager
      In-Kind Distribution Management Services (Private Markets) Provider Search
    • ESG worked in 2019, but questions remain for long term
      Latin America preparing for aging population
      To cheap large-caps go the spoils
      Only place to go is ... down
    • Institutional Investors: Shared Expectations, Divergent Paths
      Global Investor Study 2016
      Workplace Financial Wellness
    • U.S. Endowment Returns Tracker
      Pension Fund Returns Tracker
      Earnings Tracker
      Corporate Pension Contribution Tracker
  • Insights
    • Opinion
    • White Papers
    • Industry Voices
    • Other Views
    • Partner Content
    • Publisher's Update
    • Multiemployer fund legislation cartoon
      Multiemployer compromises needed
      SEC cartoon
      SEC rules need measured response
      High hopes for consistency and guidance from Scalia
      DC West poster
      Financial wellness gets spot at the table
    • Strengthen Your Core: Flexible Multi-Sector Strategies for a Low-Yield World
      WisdomTree Yield Enhanced U.S. Aggregate Bond Fund
      Automation, lower fees driving institutional interest in factor investing and smart beta strategies
      A Great Time to Be Agnostic?
    • Gerald Cooper
      Commentary: Single-asset deals – a structure benefiting GPs and LPs alike
      Gordon Latter, Timur Kaya Yontar and Frank Benham
      Commentary: Plan sponsors, do you know your credit risk?
      Timothy Boomer
      Commentary: For plan sponsors, derivatives shouldn’t be a dirty word
      Martin Vogt
      Commentary: Renewables investing makes inroads in the Caribbean, Central America
    • Commentary: Stronger partnership needed between shareholders, managers
      Commentary: Revised statement on corporate purpose misses the mark
      Commentary: The associated costs of DB terminations
      Commentary: Support the Butch Lewis Act
    • P&I Content Solutions
      EDHEC Research For Institutional Money Management - December 2019
      P&I Content Solutions
      Dynamic derisking: How an OCIO can help plan sponsors manage funding volatility
      P&I Content Solutions
      OCIO graduates from education phase
      P&I Content Solutions
      How to navigate the choppy investment waters expected in 2020
    • Everything Must Change
      Tomatoes & Investments
      Baby, it’s hot outside!
  • Multimedia
    • Videos
    • Webinars
    • Polls
    • Slideshows
    • Charts / Infographics
    • Excellence & Innovation Awards 2019: Laura Mittelstaedt
      DC West 2019
      Excellence & Innovation Awards 2019: Lisa Joe
      DC West 2019: Empower Retirement's Doug Peterson on cybersecurity
    • Finding the Positive in Negative Interest Rates
      How to Position Institutional Portfolios to Capitalize on China’s Growth
      Financial Wellness: Gaining an edge with plan sponsors
      Trends in Hedge Fund Investing
    • POLL: Creating a great workplace
      POLL: Shared values between money managers and plan sponsors
      POLL: Climate change's impact on investing
      POLL: Ultralong-term U.S. Treasury bonds
    • view gallery
      85 photos
      Best places to work in money management 2019
      view gallery
      21 photos
      The world's 20 largest retirement funds
      view gallery
      11 photos
      Top 10 DC money managers
      Top 15 managers by worldwide institutional AUM
    • ESG worked in 2019, but questions remain for long term
      Latin America preparing for aging population
  • Events
    • Conferences
    • Webinars
    • East Coast DC Conference
      Fixed Income & Credit
      DC Investment Lineup
      ESG Investing
    • Finding the Positive in Negative Interest Rates
      How to Position Institutional Portfolios to Capitalize on China’s Growth
      Financial Wellness: Gaining an edge with plan sponsors
      Trends in Hedge Fund Investing
  • Careers
  • Research Center
MENU
Breadcrumb
  1. Home
  2. Print
December 08, 2008 12:00 AM

Uncle Sam looks better to overseas investors

Thao Hua
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    REUTERS/Jumana El Heloueh
    Soud Ba'Alawy, executive chairman of the Dubai Group, said the group is eyeing stakes in U.S. asset managers.

    Institutional investors in Europe and the Middle East may be poised to raise their stakes in the U.S.

    Low valuations and aggressive federal intervention to lift the economy out of recession are enticing overseas investors, according to consultants and asset managers. Although most investors are still on the sidelines because of high volatility in markets globally, there's evidence that an increasing number are laying the groundwork to buy more U.S. assets in 2009, including listed stocks, corporate bonds, private equity and real estate.

    At a time when many U.S. active asset managers are struggling to attract new business amid the market turmoil, renewed interest in U.S. investments among overseas institutions may be an important key for their long-term growth, according to consultants and managers.

    Diversification is another key driver, consultants said. Especially in Europe, where investors generally underweight U.S. stocks within their equity portfolios, some are planning to add U.S. equity or switch to a global strategy, which generally has a larger portion invested in the U.S.

    “As investors diversify more overseas, the U.S. has been increasing as a function of that trend,” said Mary Kerrigan, senior investment consultant at Watson Wyatt Worldwide, Reigate, England. “I would expect that trend to continue.”

    Seeking opportunities

    One investor looking for more opportunities in the U.S. is the Dubai Group, a government-owned asset management company set up as part of Sheikh Mohammed Bin Rashid Al-Maktoum's plan to diversify Dubai's economy. The company does not disclose assets under management, but estimates from banking analysts have the Dubai Group at around $40 billion.

    Earlier this year, the Dubai Group added a second U.S. office in Pittsburgh to focus on U.S. capital markets. The group is aiming to raise $500 million to $1 billion from investors in the Middle East and North Africa to invest in a fund focused on U.S. equity. Direct stakes in U.S. real estate and asset management companies are being considered, according to Soud Ba'Alawy, executive chairman of the Dubai Group, Dubai, United Arab Emirates.

    “We've got a strong balance sheet and strong liquidity,” Mr. Ba'Alawy said in an interview at the World Pension Forum conference in Dubai in November. “We're quick to make sure that we're positioning ourselves to take advantage of the opportunities for the next cycle to come.”

    Other investors, such as the Abu Dhabi Investment Authority, the world's largest sovereign wealth fund, might add U.S. private equity investments, according to a source familiar with the fund. Based in Abu Dhabi, United Arab Emirates, ADIA doesn't reveal assets under management, but recent estimates by banking analysts have been around $675 billion. About 5% of its portfolio is invested in private equity.

    “Any area showing signs of distress is a good place for investors to set their sights,” according to the source. “This does not mean that (ADIA) will forget about Asia or the Middle East or Europe; a well-diversified portfolio means being interested in all regions globally. But at the moment, valuations in the U.S. indicate that there are probably some good companies that can be acquired relatively cheaply.”

    In Europe, a long-term structural shift away from a regional or domestic bias is combined with a short-term cyclical trend toward the U.S. as a relatively safer market during a global downturn, said Lucy MacDonald, director and CIO of global equities at RCM (UK) Ltd., London. A stronger dollar and general outperformance of U.S. equity compared to international equity strategies this year have also bolstered the case for investors to consider buying American.

    “The U.S., as a market, is a more diversified and deeper market,” said Ms. MacDonald, whose firm has $105 billion in assets under management, $10.6 billion of which is in U.S. equity strategies. “In a difficult investment environment where risk aversion is high, that's where people tend to want to hide in equity terms.”

    The structural shift toward global equities is particularly evident in the U.K., where the average allocation to domestic stocks stood at about 50% of the overall equity strategy among pension funds, said Watson Wyatt's Ms. Kerrigan, citing data from Bank of New York Mellon Corp., New York. In comparison, U.S. equity averages about 12% of the total equity allocation. Five years ago, U.K. equity comprised about 70% of the typical equity portfolio.

    Ms. Kerrigan estimates that domestic equity exposures among U.K. pension funds might shrink to 10% to 20% as a percentage of the entire equity portfolio in five to 10 years. Depending on market capitalization movements, the U.S. equity could increase to 30% to 50% within the same time frame. By market capitalization as a percentage of the global economy, the U.S. accounts for 50.28% while the U.K. accounts for 9.76%, according to a breakdown by country of the Morgan Stanley Capital International World index as of Sept. 30.

    Another factor attracting investors is the theory that U.S., having led the world into a recession, would be the first to lead global markets out of the economic quagmire, according to Peter Preisler, Copenhagen, Denmark-based director and head of business development for Europe, Middle East and Africa at T. Rowe Price Group Inc. T. Rowe Price had $345 billion in assets under management as of Sept. 30.

    “We're seeing more activity in U.S. strategies (coming from EMEA clients) now than we've ever seen in 2½ years,” said Mr. Preisler, who declined to name specific clients. “Investors are looking at investment-grade bond, high-yield and equity in the U.S. market. ... We see a lot of potential business.”

    Ulrika Bergman, head of institutional sales for Benelux and Scandinavia at Principal Global Investors, Des Moines, Iowa, also has noticed an increase in institutional interest in U.S. equity. Principal is participating in two separate searches worth several hundred million euros each from European pension funds for active U.S. equity managers. Ms. Bergman declined to name the funds.

    “A year ago, there was no interest in U.S. equity” from European institutional investors, said Ms. Bergman, whose company reported $228 billion in total worldwide assets under management as of Sept. 30, including about $19 billion in U.S. equity strategies. “Many have actually been taking down their exposures (to U.S. equity) up until the end of last year. Now, they seem to be looking at opportunities to get into the U.S. again, not only because the dollar is strengthening, but U.S. stocks look cheap. ... Of course, they may get even cheaper, so I don't think (investors) are going to rush into it.”

    Moving to America

    Asset managers running global equity strategies are already shifting a bigger chunk to U.S. equity, according to Michael Green, London-based senior vice president for international at American Century Investments Services Inc. For example, in the firm's own global growth strategy, 54% of the total assets were invested in the U.S. at the end of October. A year ago, that number was about 40%, he said. The strategy has about $3 billion in assets.

    “It hasn't been a conscious decision to expand the U.S. portion” of the global portfolio, Mr. Green added. “It is entirely a function of where we have found the opportunities from a bottom-up perspective.”

    Recommended for You
    sponsored content
    Events
     
     
    Advertisement
    White Papers
    A Great Time to Be Agnostic?
    Shedding the Home-Country Bias
    Automation, lower fees driving institutional interest in factor investing and s…
    WisdomTree Yield Enhanced U.S. Aggregate Bond Fund
    Strengthen Your Core: Flexible Multi-Sector Strategies for a Low-Yield World
    View More
    Sponsored Content
    Partner Content
    How Big Data Delivers Solutions to ESG Investors
    How a Multisector Credit Approach Can Lower Risk, Increase Diversification
    ESG Investing Supplement
    Know Your DB Plan’s ‘Persona’ to Help Make the Right Strategy Choices
    Leveling the playing field for public employee retirement security
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    pilogo-NEW
    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    150 N. Michigan Ave.
    Chicago, IL 60601

    Contact Us

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    Pensions & Investments
    Copyright © 1996-2019. Crain Communications, Inc. All Rights Reserved.
    • NEWS
      • Alternatives
      • Consultants
      • Defined Contribution
      • Frontlines
      • Hedge Funds
      • Investing / Portfolio Strategies
      • Money Management
      • Pension Funds
      • People Moves
      • Private Equity
      • Real Estate
      • Searches & Hires News
      • Special Reports
    • Data
      • Research Center
      • Searches & Hires Database
      • Searches & Hires News
      • RFPs
      • Charts / Infographics
      • Sponsored Research
      • Trackers
    • Insights
      • Opinion
      • White Papers
      • Industry Voices
      • Other Views
      • Partner Content
      • Publisher's Update
    • Multimedia
      • Videos
      • Webinars
      • Polls
      • Slideshows
      • Charts / Infographics
    • Events
      • Conferences
      • Webinars
    • Careers
    • Research Center