Top five asset management groups control $450bn, reports Dickon Reid
According to international consultants William M Mercer’s latest fund manager report, globalisation is producing impressive growth among European pension fund managers, with the top five companies managing a total of $450bn (E450bn), up almost 5% on the previous year’s total. The urge to expand into foreign countries has meant 54 of the 185 managers surveyed took part in mergers and acquisitions last year. Twenty six of the 54 mergers involved UK companies and 11 included US companies.
The same five managers top the latest table, only in a different order. Barclays Global Investors’ assets of $107bn, up from $88.9bn, boosts it from fourth place to first, and shows the impact of passive management. This regulates Merrill Lynch Mercury Asset Management, with $100.4bn, two places to third. Schroders maintains second spot having assets of $100.8bn, down $2bn on the previous year and although Phillips & Drew maintained fourth position, its bearish stance has seen its assets drop from$88.8bn to $72.1bn.
Total pension assets in the 15 countries now stand at $3.7trn, up 13.5% from $3.2trn. Over the last three years, the percentage of these managed by foreign firms has doubled to 8% with the Netherlands and Belgium registering the highest foreign penetration. Globalisation has also meant a 150% rise over the last five years in the number of companies with more than two home bases.
“The main factors driving globalisation are market reform, the unifying of industry standards and the increasing acceptability of non-domestic players by pension fund sponsors,” says Julia Hobart, the report’s author. “The industry has effectively established an international standard-including delivered results, performance measurement, risk management and greater transparency. With the growth of cross-border business, even purely domestic players are facing international competition and recognise the need to meet the new standard,” she says.
The introduction of the euro has led to a shift from domestic bond mandates (down to 506 from 686) into European bond mandates (up 244 to 367) as domestics turned into euro-denominated bonds in the Euro-zone. The report also found a substantial growth in specialist European equity mandates, up 57% in the year to June 1999.
The report noted a shift from balanced multi-asset appointments into specialist management, particularly in the US where the number of specialist US equity mandates has doubled from 81 to 161 in the last year. “The shift from balanced to specialist management is linked with the growth in index-tracking. Increasingly, pension funds are prepared to pay more added value and correspondingly less for exposure… in other words, pension funds are becoming more sophisticated in their buying habits,” says Hobart.
Index tracking in the UK has risen to a quarter of all assets managed but the growth referred to above is taking longer to catch on in Europe. On the continent, index funds represent 4% of assets under management, double that of last year. “Continental Europe has been slower to catch on to index-tracking but this is mostly to do with the early stage of the market’s evolutionary cycle,” says Hobart.
The survey is based on statistics collected as at 30 June 1999. For further information or copies of the report, contact Alexa Bodel or Linda Samuels at William M Mercer on 0207 963 3329/3361