Five years ago, when Todd Ruppert surveyed the European asset management opportunities for US manager T Rowe Price((TRP) from Baltimore in Maryland, it was with a blank sheet in front of him and one arm tied behind his back.
Because of TRP’s joint venture with UK manager Flemings dating back to 1979 to manage non US equities and bonds for US investors, Rowe Price Fleming International, “we were precluded from offering our non US capability outside the US,” he explains. What he had to offer was TRP’s US equity and fixed income capabilities.
With native wit, charm and utter conviction about the products he was bringing across the Atlantic, Ruppert threaded his way into the institutional market here, first by using the three investment forums promoted by the European Pension Fund Investment Forum, bringing the buy and sell sides of the industry together in the UK, Dutch and Nordic markets. Then, TRP took a stake in UK-based Helix Associates, an independent private equity placement agent, which had a continental contacts network second to none.
“We have had good successes, as we now manage assets for a range of continental and UK clients, across numerous asset classes,” he says. In the first two and half years, TRP pulled in some sizeable mandates from these sorties by Ruppert, who reckons he was spending about a third of his time on European development. More recently, TRP had some notable results in the Nordic market with identical mandates from three Danish pension funds and it took in some $700m (E806m) of assets from European investors so far in 2001.
Suddenly, the whole picture changed last year, as a result of the Chase acquisition of Flemings, and TRP dug deep into its pocket and paid out $483m in cash and borrowed $300m to exercise its option to buy-in the other half of Rowe Price Fleming International. “Now we are a sizeable international operation, with at end 2000, around $38bn of the $166bn that the group manages globally in non US assets, managed out of London and other offices world-wide under the new name of T Rowe Price International(TRPI),” says Ruppert. This operation has its own separate product range developed over the years, and is, for example, the largest provider of ‘no load’ international mutual funds in the US. “The new company inherits a great client list among the Fortune 100 companies,” he adds. Importantly, the team of portfolio managers who built the business have all stayed with the new company, he points out.
“Following the acquisition, we have set up our own fully fledged non-US marketing T Rowe Price Global Investment Services (TRPGIS) in London, an IMRO regulated operation, that has recruited eight professionals for delivering our products and services world-wide.” An office has been opened in Copenhagen and TRPGIS will examine the opening of others. “A new fund range is planned to launch this summer, which will marry the global and international investment capabilities of both the US and the international operations.” Now under the leadership of Tom Pedersen, a seasoned and well-connected continental market campaigner, the group is targeting initially the Nordic, Dutch, Swiss and German for global and sector equity and corporate bond and other fixed income mandates.
He attributes the group’s success so far to the rigorous adherence to its investment process. “We have a well oiled, stable process, resulting in consistent performance overtime. What has gone down well with European investors is that we take risk very seriously. Our portfolios tend to have returns higher than benchmark, but with lower volatility than the market, resulting in good information ratios.”
The ability to provide this outperformance in bottom-up stockpicking comes from the way the company is structured, he maintains, with some 25% of the company employee-owned. The stability of portfolio managers and analysts as to the length of time with the firm is well above the industry average. The firm treats analysis as a lifetime career if that is what people want, and has over 65 analysts, he adds.
“We are looking for institutional segregated business as well as fund assets through institutions and intermediaries. We will also act as sub-advisers to other organisations – we have a big third-party businesss in the US, amounting to $30bn. Our aim is to grow methodically and profitably, without jeopardising the integrity of our investment process for the sake of winning business.”
The aim is to offer all the service capabilities on offer in the US to European markets. As a big DC provider in the US, the group is inevitably keeping an eye on this area. “We feel it would be very difficult to tailor a US DC system to European markts, so our view is that you have to develop one for the market here and we believe we can provide know-how for this.” But the US obsession with client servicing is a pre-occupation that will be insisted on this side of the Atlantic.
The institutional market in Europe will be driven by the pensions business, Ruppert maintains. “But the assets will only flow to those who are providing the products the market wants. We have these and the people, the technology and the size to do this on global basis. It is a matter of being well regarded by the groups that retain us, by exceeding their expectations in terms of performance and servicing.”
The name of the game is profitable growth – not assets under management. Acquisitions are not ruled out, but their potential will be measured by what they bring and any threats thy pose to TRP’s successful corporate culture. “We believe we are of a size that is significant as one of the bigger mutual fund providers and institutional account managers. We can survive and thrive on our own.”