SAN FRANCISCO - Barclays Global Investors is undergoing a sweeping reorganization into geographic and functional units that elevates former joint chief executive Patricia Dunn to co-chair alongside Fred Grauer.
In another significant move, former Vice Chairman Donald Luskin has been delegated to develop Barclays' global mutual fund operation, with an immediate focus on Great Britain, Japan and off-shore operations.
Ms. Dunn and Mr. Grauer told Pensions & Investments that Barclays also is negotiating with an unnamed institution to form a strategic alliance with Barclays MasterWorks, which provides bundled 401(k) products.
The changes at the world's largest institutional manager, with $410 billion under management, cement the dominance of its San Francisco operation, a shift that was signaled last year.
Global investment duties also will be based in San Francisco, although regional operations will have full investment and client servicing capabilities.
Regions are the Americas, Australasia, Europe and Japan. Functional units are "advanced active" quantitative products, indexed products, technology, risk management and internal support functions. Also, a separate capital markets unit handles the manager's securities-lending activities.
Blake Grossman, former chief investment officer for the California unit, has been named CIO for advanced active strategies, with some $80 billion in assets. Nic Stuchfield, previously in charge of operations and technology, will oversee the $330 billion in indexed assets on a global basis. Both also will oversee U.S. activities in their respective areas.
Ms. Dunn's promotion to co-chair does not signal early retirement plans for the 50-year-old Mr. Grauer. Ms. Dunn, he said, has consistently been a top performer and her elevation was a recognition of her accomplishments.
Ms. Dunn will be responsible for the Americas, Australia and Southeast Asia. She will oversee the company's enterprise services, which constitute finance, human resources, facilities and technology.
Mr. Grauer will have responsibility for Europe and Japan. Functions he will oversee are advanced active investments, indexed investments, risk management and capital markets, which is Barclays' security lending activities. He also will serve as a liaison with the parent bank, where he has developed a close relationship with Chief Executive Martin Taylor.
Barclays has created a new "structure that meets both the local needs of the company and its global aspirations," said Lindsay Tomlinson, formerly joint chief executive and newly named chief executive for BGI's European operations.
There will be no immediate changes in the investment of client assets.
The internal reorganization represents the third major set of internal changes in Barclays' investment management operations since the bank acquired Wells Fargo Nikko Investment Advisors for $440 million in December 1995.
The bank's goal was to build up a stable fee-generating business, although asset management will provide only 2.3% of the bank's 2.4 billion pounds ($3.9 billion) in profits this year, Salomon Brothers estimates.
From the unveiling of the deal in June 1995, it was publicly portrayed as a partnership, in which London and San Francisco would share power jointly.
But a hint of San Francisco's rising power surfaced in late 1995 when Mr. Grauer was named chairman of BZW Barclays Global Investors, the firm's quantitative investment arm, with Ms. Dunn and Mr. Tomlinson serving as joint chief executives. A traditional active management business, BZW Investment Management, and a real estate manager, BZW Property Investment Management, were run out of London.
The shift in power to San Francisco became more apparent last October, when Barclays announced it was shutting down the active management business, with 38 billion pounds in assets under management. What's more, all units dropped BZW from their name, in line with Mr. Grauer's wishes.
Active equity growth slow
While the traditional active unit's fixed-income business and Japanese unit were growing substantially, its active equity management, although promising, had failed to take off. Competing bids by the active and quantitative units were generating confusion in consultant-driven pension markets.
(About 5 billion pounds of the active unit assets were shunted into Barclay Bank's international and private banking units. Of the remainder, so far about half has been converted to active quantitative strategies - with the same investment objectives and fee levels.)
Meanwhile, the quantitatively driven business had gone gangbusters. The U.S. unit alone pulled in $24 billion in net new business in the first 11 months of 1996, according to data submitted to P&I by BGI. Another $17.5 billion in net new business was gained from new and existing non-U.S. pension clients during that period in various strategies.
Still, the management structure - essentially splitting the world into two between the United States and the rest of the globe - proved to be unwieldy.
Oversight responsibilities ranging from Great Britain to Japan generated some "serious time headaches" said Mr. Tomlinson, and provided him "opportunities to work 18 hours a day."
Once the new structure was set, BGI officials tried to put people with the right skills into the right jobs.
What emerged was a central structure based in San Francisco with regional operations, erasing any doubt that San Francisco had in fact pulled off a reverse merger.
Regional and functional roles
In addition to Mr. Tomlinson overseeing Europe, Larry Tint, formerly in charge of the U.S. institutional group, was named chief executive of the Americas. Kaz Okamoto remains chief executive for Japan; and Ms. Dunn serves as acting chief of Australasia.
A fifth arm of Barclays, in charge of capital markets - essentially BGI's massive securities-lending operation - will be overseen by John Martinez, formerly president of capital markets group. Although the parent bank recently sold its global custody operation to Morgan Stanley & Co., BGI retained securities-lending for its investment management clients.
In addition to a regional breakdown, functional units will have different responsibilities. On a global and U.S. basis, Andrea Zulberti, formerly chief financial officer, will oversee risk management; Garrett Bouton, formerly global human resources director, will head enterprise services, which covers such things as finance and administration. A head of technology - split from Mr. Stuchfield's former role - is expected to be named soon.
In London, Andrew Skirton, who previously had served as chief executive of the active management unit and then deputy chief executive of BGI's European unit, became CIO for both advance active and indexed products. Mike Brown is transferring from BGI's Sacramento, Calif., office to become head of operations and administration.
James Woodlock, formerly president of BGI-Europe and one of the founder's of the U.K. bank's quantitative investment arm, will become head of business development and client services.
Managing multinational assets
One issue for the future is where assets from multinational portfolios should be managed.
Now, assets are managed from the country of origin with input from local market specialists. BGI executives are exploring whether to shift management of assets to the local market, so, for example, all U.S. equities would be managed out of San Francisco, regardless of where the accounts are domiciled.
Officials also hope to develop a global trading book to take maximum advantage of the manager's internal crossing capability.
Meanwhile, Barclays is keen to develop its global mutual funds, which are part of the asset management group but separate from In Britain, they will build on the bank's Unicorn mutual fund group, with 5 billion pounds in assets under management. Other priorities are developing the group's Japanese and offshore units.
In addition, the asset management group is tackling the private client market through BarclayTrust, which services 24,000 trusts, 30,000 tax relationships and 156,000 executorships. Ron Gould, formerly vice chairman of the bank's asset management holding company, and Jane Platt, previously chief operating officer, were placed in charge of the unit in October.
Effect on morale
Observers hope the latest restructuring is the last, so the staff can settle down and spend less time on organizational issues.
Some outsiders are incredulous that consultants haven't put BGI's feet to the fire for the relentless personnel and organizational changes during the past year.
Ms. Dunn and Mr. Grauer said the changes at Barclays are proportionate to the growth the company has undergone. Clients can, nevertheless, expect substantial changes every two to three years because Barclays is a global institution operating in a dynamic environment, they said.
"If you are not significantly reorganizing your business every 12 to 18 months, you are not optimizing your organization," said Mr. Grauer. "Your organization is living in the past. The pace of change in this industry is dramatic."
And it is still evolving at Barclays.
Ms. Dunn and Mr. Grauer declined to talk specifically about the changes for MasterWorks.
"We went through a substantial strategic review of MasterWorks," said Mr. Grauer. "What we are looking for is a strategic alliance: a way to leverage the MasterWorks set of competencies.
"It's not for sale per se," he said. "It's being repositioned with some other players for whom it would be complementary."