US/EUROPE – Only two of the top ten managers in international cross-border mandate wins from US tax-exempt pension plans last year were European, with both houses UK based, according to Deutsche Bank owned research group InterSec....

While InterSec does not publicly announce the managers, Carol Parker, director of North American Research at InterSec says that in general the definition of success with US tax-exempt plans rests primarily with good performance and low tracking error, but she notes that there are one or two of the managers in the top ten which have below average performance but well defined processes, adding that both were value managers.

Kim Yates, director of Marketing (Europe) at InterSec in London, comments: “ We may witness this kind of trend in the UK where style and process are considered equally important aspects in manager selection, but it may take some years to come.”

InterSec’s analysis of US tax-exempt cross-border mandate trends, also reveals that US public pension funds are increasingly benchmarking their managers against MSCI’s ACWI (All Country World Index) ex US index, in order to get exposure to emerging specialist portfolios.
Use of ACWI jumped sharply in 2000 from 16.9% of public plan international equity funds, to 27.3%.
Salomon’s BMI ex US index has also picked up 10% of international equity fund mandates from almost nothing in 1999, in a sign that changes in the MSCI indices related to free float are causing US plan sponsors to review their benchmark choice.

However, InterSec says it believe that specialist emerging portfolios provide a very different type of exposure to emerging assets than portfolios benchmarked to an ACWI ex US index.
“ We believe that there will be an ongoing interest in both types of approaches and we expect specialist emerging assets will continue to be an important mandate type.”