Schroder Capital Management International and Genesis Asset Managers Ltd. temporarily stopped accepting emerging markets allocations from most new clients.
These moves follow September's temporary closure of Capital International Inc.'s Emerging Markets Growth Fund. That closed-end, $11.3 billion vehicle reopened Jan. 1.
The actions underscore the growing popularity of emerging markets and, for some firms, the need to absorb sizable allocations to avoid overwhelming smaller markets.
New York's Schroder Capital, a unit of Schroder PLC in London, manages $3 billion in dedicated emerging markets mandates for U.S. clients.
"It has always been policy to manage the growth of individual investment products. Following a period of exceptional interest from U.S. clients, we are currently managing the flow of new assets across all our emerging markets products. However, we remain open to existing clients and are completing a small number of searches that were already in process," Schroder officials said in a statement.
The situation will be reassessed in a couple of months.
Early this year, Genesis Asset, a unit of the Genesis Group in London, stopped accepting allocations from new emerging markets clients. But the firm is accepting investments from existing clients and from "a very few clients with whom we had initiated discussions some time ago," said the firm's chairman, Jeremy Paulson-Ellis. While the suspension is "only temporary, we want to be careful to deploy assets into the markets in a manner that would would be advantageous to clients overall," he explained. No date has been set for lifting the suspension.
Genesis had $5.15 billion in emerging markets equities under management as of Jan. 1. Of that, $3.048 billion came from U.S. institutional tax-exempt clients, according to information Genesis provided for Pensions & Investments' annual survey of money managers.
The EMG Fund of Capital International, Los Angeles, is allowed to sell only an additional 30% of its shares in any one year, said Abbe Shapiro, assistant vice president. The amount varies based on the number of outstanding shares at the end of the previous year. Once the holdings are sold, the fund becomes closed for the remainder of the year.
These and other firms are coping with the rising popularity of emerging markets investments.
Uri Dadush, chief of international economic analysis and prospects at the World Bank, Washington, estimated net long-term-oriented portfolio flows to developing countries from all sources could hit a record $50 billion this year - up from last year's record $45.7 billion.
Investments by U.S. institutions climbed sharply last year. According to InterSec Research Corp., Stamford, Conn., U.S. tax-exempt assets in emerging market equity jumped to $35.6 billion at the end of 1996, compared with $3.9 billion at the end of 1991. In 1996 alone, the holdings jumped almost 60%, InterSec's data show.
Emerging markets is the fastest growing international investment sector, InterSec statistics show.
For at least some firms, strong interest is continuing. After Capital International's EMG Fund reopened in January, it drew more than $1 billion of new assets in the first quarter. And now, at its current net asset value, the fund has about $1.7 billion worth of shares available for sale this year, said Ms. Shapiro.
Given the strong interest in the fund, she sees a possibility the fund's shares might again be absorbed before year's end. (The EMG Fund also closed in 1995.)
Of course, not all popular emerging markets managers have temporarily closed to new clients. Nor do the current closures thwart emerging markets investing. According to Jim Waterman, InterSec senior vice president, investors can find "quite an array of managers who offer products and who have substantial capabilities" in this area.
Today, InterSec can identify 30 to 40 managers that have attracted emerging markets allocations from U.S. tax-exempt clients; four years ago, the number would have been about half as large, he said.
Donald F. Reed, president of Templeton Investment Counsel Inc., Fort Lauderdale, Fla., said his firm is seeing continued strong interest in emerging markets.
That includes additional allocations from existing clients as well as interest from potential new clients. At the end of March, Templeton managed roughly $12 billion of emerging markets assets from its Hong Kong and Singapore offices.