Baring Asset Management has been awarded a $55m international active/passive equity mandate by Stiftelsen Riksbanken Jubileumsfond, an independent foundation set up in 1962 by Bank of Sweden to promote and support scientific research.
Baring's new active/passive approach to international equity investment seeks to merge traditional active decisions by fund managers over asset allocation and stock selection with the trend towards funds that replicate the market index.
These track the index by holding representative stock, which provides a close replication of the index, all holdings of the index, or a mixture of stock and derivatives. Their effect has been to reduce management fees, but with the weakness that managers are forced to buy companies as they become expensive following good performance, to maintain index weighting. Hence the increasing belief that both active and passive styles of management have an important part to play in building fund assets, says Barings.
According to Lars Erik Klanby, director of finance at Stiftelsen, this mixture prompted the choice of Barings: When you look at most asset managers, they tend to look at the index very closely in making any decisions. So we thought we would take the full step in tying ourselves to an index-linked fund. Barings were the only company to submit a quote for this style of active/passive investment, which is what we were looking for."
The fund, previously managed in-house, aims to outperform a composite international equity benchmark denominated in Swedish kronor developed for the Jubileumsfond.
Mark Leader, director of business development, Nordic region at Barings, explained its active/passive management set-up: "We have an agreement in the US with State Street who run our active/passive index matched funds over there, and similarly in Europe they have produced a series of pooled funds open to European investors across which we can allocate. It is a joint approach whereby they have the index funds and we have the asset allocation and currency hedging strategies which enable this active/passive management.
" Clearly we are delighted at this new deal with Stiftelsen Riksbanken, which represents a high profile success for our long-term business strategy in the Nordic region and this newly developed active/passive approach to equity investment." Hugh Wheelan"