UK – Capital International’s “performance difficulties” may hinder its ability to win new business in the UK, says investment consultant Hymans Robertson.

It noted that Capital – seen by rivals as the “asset manager’s asset manager” - has risen up the leaderboard of largest institutional pension fund managers in the UK. Capital has risen to fifth place, from seventh previously, in Hymans’ ranking – with a 14% growth in new business.

“However, performance difficulties at Capital are likely to slow new business opportunities for the firm during 2005,” the consultant said in a market briefing. It has surveyed 50 of the largest fund management firms in the UK during the first quarter of 2005.

Hymans principal George Henshilwood told IPE in an interview: “It’s fair to say that Capital’s results over the last 18 months in UK and global equities have been a little disappointing.”

But he added that it was “absolutely not the case” that the firm had lost confidence in Capital, and that any underperformance was due to cyclical reasons and not a lack of capacity at the firm. Henshilwood added that Hymans was still recommending Capital to clients. Capital was not immediately available for comment.

Hymans’ comments follow remarks from ratings firm Fitch in January suggesting the reclusive US-based firm still had “further additions” to make to its European business.

One of the findings of the Hymans survey was the “continued strong growth” of passive managers such as Legal & General, Barclays Global Investors and State Street Global Advisors.

And it found a “meaningful reduction” in the number of new institutional mandates placed in 2004, with fewer new business opportunities presented by the switch to specialist managers.

“This has all contrived to push business retention as well as business development up the agendas of many fund management houses,” Hymans observed.

And it said: “We wait to see how much tolerance trustees and consultants will have for significant short-term manager underperformance (an inevitable consequence of higher risk approaches) in terms of changing mindsets and taking a longer-term perspective on manager appointments.”