Major U.S. money management organizations are winning business from subsidiaries of their U.S.-based multinational clients.
While pension executives at U.S. multinational corporations are reluctant to mandate that subsidiaries use the same managers as the parent, in the interests of uniformity and efficiency they often help those managers win the business by providing introductions to the subsidiaries' pension staff, or providing information on the subsidiary's needs.
And the management firms have built up their foreign offices and communications links to those offices to enhance their overseas management, marketing efforts and administration services.
"To survive, pension managers will need to have both a successful global investment strategy and an incisive global business strategy," said Chris Nowakowski, managing director of Intersec Research Corp., Stamford, Conn.
This strategy involves working more closely with their multinational clients that have subsidiaries with separate pension funds to win that business.
Although there is often resistance from local subsidiaries to having the headquarters staff tell them what to do with their pension assets, more multinationals are doing it "as pension assets turn from being an unfunded liability to becoming a profit center," according to Mr. Nowakowski.
There's the concern by multinational companies that "if you screw it up in Italy, it could affect the bottom line at home," he said.
Said Robert Haber, head of global sales and service at Barclays Global Investors, San Francisco: "There's resistance in general to central authority, and there are different customs in different countries," which has created the need for local services from global money managers. "It's difficult for someone in New York to say what a pension plan in London has to do."
BGI's index fund expertise has helped the firm win multiple mandates. The firm manages Dallas-based Kimberly-Clark Corp.'s $3.3 billion U.S. defined benefit plan, as well as indexed portfolios for the $700 million pension fund of its U.K. subsidiary and the $200 million pension fund of its Canadian subsidiary, according to L.Robert Frazier, assistant treasurer, asset management, for Kimberly-Clark's $5.5 billion U.S. pension fund.
Mr. Frazier said he "collaborates" with the overseas pension funds, giving advice on manager selection, but he lets the local executives make the final choice of asset managers.
At INVESCO Corp., Atlanta, "we have the luxury of thinking global and acting local," said Sam DeKinder, director of institutional marketing.
INVESCO keeps an electronic data base on all of its clients that can be shared by its employees around the world. "If I have a meeting with a client in the U.S., I put a summary of the meeting points in the data base and the guy who works with the plan sponsor based in Paris can go in and see what was said and know how the meeting went," said Mr. DeKinder.
Among other clients, INVESCO is working for a large U.S.-based technology company for its European subsidiaries. "The home office wants to have a good relationship with the subsidiaries and doesn't want to seem to be forcing something on them," said Mr. DeKinder. "We have INVESCO Europe and INVESCO Asia staffed with people who speak their languages and can deal with local customs."
At General Motors Investment Management Co., New York, there is the dual role of both money manager and the multinational client - General Motors Corp. - that it works for.
The bulk of General Motor's foreign pension fund money is in Canada and the United Kingdom, with GM Canada's pension fund having $5 billion in assets and the U.K. subsidiary's pension fund having $2 billion in assets.
Robin Rocchi, director of international strategy for GMIMCO, said the parent company's involvement with local subsidiaries' pension funds, "depends on the fund." For GM Canada, GMIMCO has a contract to manage the assets for the pension fund. "We have regular meetings with them about the fund," said Ms. Rocchi.
In the United Kingdom, Alan Reed, president and CEO of GMIMCO and David Holstein, head of international investing for GMIMCO, sit on the advisory committee for the fund and "make recommendations to them," said Mr. Holstein.
For pension funds in Holland and Belgium, representatives from GMIMCO "go out and visit managers with their people, and we discuss things with them, but they make the final decisions," said Mr. Holstein.
Quick communications
J.P. Morgan Investment Management Inc., New York, is aggressively pursuing pension fund business from multinational companies' overseas subsidiaries. Douglas Fleming, head of institutional sales for Morgan, said, "Internally we have a mechanism so we can communicate with our counterparts around the world. The right hand knows what the left hand is doing.
"When my colleague who's based in London is going to speak to local people from Ford, he knows what relationships we have with the firm, who we talk to and who's responsible."
Steven Potter, managing director of institutional business at Northern Trust Global Advisors, Chicago, said, "Many (multinational) companies like to deal with one (money management) firm across the globe. To the extent they can pick a common vendor for multiple users, it helps" make their jobs easier.
Northern Trust manages pension fund money for 10 Canadian subsidiaries and 10 U.K. subsidiaries of U.S.-based multinational companies.
"One of the most difficult things (for multinational companies) is getting local operations to go along with the head office," said Alan Brown, global chief investment officer for State Street Global Advisors, Boston. "They don't always take kindly to the head office telling them what to do."
More equity?
He said many local pension plans around the world have high fixed-income components. Multinational companies based in the United States "would like to change that to what they have in the U.S. - a higher equity exposure," he said.
Mr. Brown said SSgA provides index funds for these subsidiaries and "where the country is large enough, we will form a domestic fund based on stocks in the country where the pension fund is located."
"Some multinationals have taken a different route - they select a range of preferred fund managers and let the local companies make the decision," said Mr. Brown. "Then they tell them (the local pension plan trustees) that if they pick the manager off the preferred list, they won't hold them responsible for the performance of the fund going forward."
SSgA has worked with Eastman Kodak Co. to coordinate the pension plans of its European subsidiaries. "Kodak estimated it would save $20 million a year in pension plan contributions to get control over the asset allocations of the plans," said Mr. Brown. There were about eight Kodak pension plans in European countries.
Fidelity Management Trust Co., Boston, has a number of multinational corporate clients, some based in the United States and some overseas, that have multiple investment mandates with the firm, according to Michael Forrester, executive vice president of the relationship management group at Fidelity.
"Fidelity has made extensive efforts on the investment management side of the business to have a global approach to relationship managing with our clients," said Mr. Forrester.
Fidelity "takes direction from the company in each location and deals directly with the subsidiaries," said Mr. Forrester. Fidelity has local relationship managers in all the countries it has clients "who speak the language and can deal with their concerns directly," he added.
"We have an extensive global relationship manager program to make sure all partners around the world are kept constantly informed," about what the multinational companies and their subsidiaries are doing, said Mr. Forrester.
As an example, Fidelity manages defined contribution plan assets for Unilever Corp. in the United States, as well as for the defined benefit funds of its subsidiaries in the United Kingdom, Finland and Ireland.
Fidelity also is working with Procter & Gamble, Cincinnati, for which it manages some U.S. pension fund assets. "They've asked us to introduce our capabilities to their subsidiaries in Ireland and Switzerland, and we'll make presentations to the local companies over there."
