Financial Times
October 19, 2008
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US money managers making a push for European assets acknowledge that the current crisis raises new challenges for their plans, but are not scaling back their international goals just yet.
US asset manager American Century Investments announced its international expansion earlier this month, while Brown Advisory, an independent Baltimore-based investment advisory firm, opened a London office in February in order to build a European fund range and presence.
Groups such as Turner Investment Partners, Delaware Investments, Legg Mason and The Hartford have also ramped up their European businesses.
US fund managers are generally taking a long-term view of the crisis, says Jag Alexeyev, senior managing director and head of global research at consultancy Strategic Insight.
“Most fund managers are reiterating, especially with regards to Asia, the case for long-term growth,” he says.
If US money managers are altering their European strategies, the changes are tending to be of a short-term, tactical nature. Mr Alexeyev says companies are looking harder at how to address their clients’ needs in the next year and how to deal with other immediate issues arising from falling share prices.
Vanguard Group, known in America for its low cost index funds, is one US house that expects its European business to weather the storm.
“We have offered funds to institutional investors across Europe and the Nordics for a decade, and we believe it is a long-term business that can and has withstood shocks to the financial markets,” Vanguard’s Rebecca Cohen says.
”We do not believe this crisis will significantly impact our European business. Our transparent, straightforward funds might be seen as an antidote to less transparent, complex offerings in the marketplace.”
Legg Mason is another US-based asset management business standing firm in its efforts abroad. New chief executive Mark Fetting has previously expressed plans to increase international assets under management to more than half of overall business from about one-third previously.
“Our strategy doesn’t change in a market environment like this,” says Terry Johnson, managing director of international distribution at Legg Mason Investments, the non-US distribution arm of Legg Mason.
The market turmoil could represent an opportunity for Legg Mason’s franchise in European markets, Mr Johnson says, as the assets investors have been taking off the table will eventually create a large pool of capital needing to be reinvested.
Mr Johnson points to Legg Mason’s “multi-boutique” structure, where the parent company oversees 10 independent investment managers that run the funds, as one factor putting the business in a strong position.
James Charrington, managing director and head of international retail at BlackRock, says the market turmoil is going to impact the ability of US houses to parachute their products and services into Europe.
But Mr Charrington does not see US-based BlackRock as such a house, because of its significant presence in Europe. According to Strategic Insight, BlackRock’s BGF Global Allocation Fund is the second-largest Ucits fund as of August, with $18.3bn (£10.6bn, €13.6bn) under management.
“I wouldn’t underestimate the scale of the job in front of us,” says Mr Charrington, who cites investor confidence as the biggest casualty in the ongoing crisis.
Meanwhile, Hartford Financial Services Group announced this month that German insurer Allianz has agreed to make a $2.5bn capital investment in the US-based company. The Hartford unveiled plans earlier this year to sell variable annuities in Germany starting in the first quarter of 2009.
As market volatility continues, the US houses with a fair amount of cash, a vision for the future, and ability to think long-term stand the best chance of riding out the storm, says Ben Poor, director at US-based research firm Cerulli Associates.
