Instability in the Middle East is harming pension funds that lack sophisticated risk management strategies. Unprotected portfolios around the world are suffering as rising oil prices and ongoing uncertainty in the region are resulting in low or negative equity returns, and poor bond performance.

European investors are looking to hire fixed income specialists for complex mandates in the hope of improving returns without investing in equities, but impending regulatory restrictions could scupper their plans.

Pioneer Investments is on the lookout for six further acquisitions, according to global chief executive Dario Frigerio. As part of an aggressive push to win more institutional business, the firm is hoping to add capacity to its existing investment range, rather than to add new types of products.

Having ousted his UK chief executive, Gartmore’s global boss Paul Hondros is poised to make a string of appointments. Gartmore’s official line on the changes is that they are aimed at “refocusing the business along global functional terms” but some industry commentators see them as a centralising initiative, which concentrates power in the hands of Mr Hondros.

European investors are poised to increase their allocations to alternative investments, such as hedge funds, currency management and tactical asset allocation (TAA), according to research from the Alternative Investment Management Association and Informed Portfolio Management (First Quadrant’s European arm).

Lars Ericsson, head of marketing at IPM, said that the biggest increase is expected to be seen in the number of UK institutional investors practicing currency management, which will rise from 11 per cent to 50 per cent within two years.

Deutsche Asset Management (DeAM) has been awarded a €24.7bn sub-advisory mandate from Zurich Group Germany (ZGD) to manage the portfolio of its subsidiary Zurich Group Invest Europe Deutschland. The decision comes as part of the insurance company’s global strategy under which similar outsourcing arrangements have already been implemented in the US and Switzerland.

Credit Suissse Asset Management has unshackled itself from the investment bankers and is hungry for high margin high alpha products such as hedge funds.

There are some widely held beliefs that are regularly called into question. They are reviewed, re-assessed, scrapped and invariably resurrected. Up for debate once more in the festive season has been the notion that American investment banks can run European asset management operations.

Earlier this year, the top brass at Credit Suisse Asset Management (CSAM) were still insisting that embedding CSAM within the powerful Credit Suisse First Boston investment banking franchise was good for the asset managers.

Sarah Arkle, CIO of Threadneedle Investments, tells Simon Hildrey of her firm’s plans to seek mandates from institutional clients in Continental Europe and its expanding product range.

Even in the first decade of the 21st century, female fund managers are a rare breed. Rarer still are female chief investment officers (CIOs).

Europe’s largest pension fund has boosted its investment in alternative assets in a bid to raise returns. Elizabeth Cripps reports.

Stichting Pensioenfonds ABP, the pension fund for Dutch government and education employees, recently announced a dramatic 20 per cent strategic allocation to alternative investments.It has come a long way. In 1995, the fund’s only gesture in the direction of alternatives was a 7 per cent allocation to real estate. In 2004, the real estate allocation remained more or less the same, but it has been joined by investments in private equity, commodities and hedge funds. The move, according to Olaf Sleijpen, deputy head of the ABP asset platform, has been made “for diversification reasons”.

Suzanne Donohoe, European co-head at Goldman Sachs Asset Management,tells Yuri Bender how wooing the consultants has paid dividends.

Every year, the investment teams at Goldman Sachs Asset Management (GSAM) make separate presentations in the plush 200-seat lecture theatre in the inner sanctum of Peterborough Court on London’s Fleet Street. One full day is slated in the calendar for this, generally in November.

European small caps have performed particularly well in the last two years. As at 30 November 2004, the MSCI Europe Small Cap Index was up 28 per cent annualised since the beginning of 2003 compared with the MSCI Europe Index up 13.7 per cent for the same period. This has been driven, in part, by economic recovery - particularly in the corporate sector, low interest rates, low valuations in small caps and investors’ growing interest in riskier assets.

However, it is important to understand what might continue to support the valuations of European small-cap companies.

Various post-mortems of the US presidential elections hinged on the theme of “values”. One value that seems to have gone out of style in the US is that of saving – the 0.4 per cent household saving rate in the third quarter of 2004 was the lowest on record in the post World War II era.

Latin America is benefiting from foreign direct investment inflows, fiscal prudence, relatively stable politics, a weaker dollar and the prospect of enhanced Chinese trade and investment.

Argentina continues to recover, although its debt restructuring is yet to materialise, Venezuela’s opposition has decided to co-operate with President Hugo Chavez, Plan Colombia is set to be extended by US President George Bush (although tax reform has been watered down), Ecuador’s President Lucio Gutierrez saw off efforts to impeach him (for now).

After having experienced two strong years of growth since the Sars epidemic, Asia’s bull story is not about to reverse its course.

Despite some decelerating growth, the Asian region is still expected to stand head and shoulders above its global counterparts driven by growth in China and India.

With an expected slowdown in OECD countries set to hamper exports growth, Asia has to depend on a historically weak (but with high potential) consumer sector.

It finally looks to be starting to realise its potential as the number of middle class consumers exceed 100m and at the same time, the GDP per capita of China exceeds the sweet spot of $1000 (e744).

Close to recession, Japan must take measures aimed at stemming the dollar’s demise, either unilaterally or together with Europe, says Neil Mellor.

PGGM is determined to stick to its bold investment strategy despite the imminent departure of its investment chief and the Dutch government threatening to force it to change its internal fund management team.

The Pensions Trust, a Ł2.3bn (E3.3bn) investment scheme for 4150 UK charities, has recently overhauled its asset allocation strategy in favour of a “liability-driven” method of money management.

A Ł100m global equity manager of managers win from InterContinental Hotels contributes to Frank Russell’s dominant status in FT Mandate rankings. Henry Smith reports.

FT Mandate’s research on processes and performance of fund of hedge fund managers is analysed by Henry Smith.

Funds of hedge funds are best suited for alpha strategies, while those with a beta focus could be better off using investable hedge fund indices. Mathieu Vaissié explains.

Strategic asset allocation target reassessed every quarter and portfolios constantly monitored.

CORONATION FUND MANAGERS

Style bias diversification within a strategy is a key selection criteria.

GOTTEX FUND MANAGERS

Risk management relies mainly on qualitative factors.


LOMBARD ODIER DARIER HENTSCH & CIE

Fund has opted for exposure to event-driven managers due to tightening of credit spreads.

UNION BANCAIRE PRIVÉE

Currency overlay has seen huge growth in the last 18 months as funds have looked at the opportunity and the risks of unmanaged currency in their portfolios, says Peter Wakefield.

Currency overlay is the management of currency in an investment portfolio separately from the management of the other investments. It is currency management ‘overlaid’ over the top of other assets, meaning that it can take place on a large portfolio without reallocating more than a small fraction of that portfolio to support the currency management.

A growing number of investment managers are well-placed to assist trustees make ‘bonds plus’investing accessible to pension schemes of all sizes, explains Steven White.

UK pension schemes need investment returns. Many are facing deficits on any reasonable basis of calculation and ever generous contributions are unlikely to plug the gap in many cases. Yet there is strong evidence to suggest that trustees are becoming more risk-averse.

Despite fierce competition Pioneer Investments’ global management team is confident it can build a substantial institutional presence worldwide. Interview by Roxane McMeeken.

There is nothing particularly remarkable about a medium-sized funds manager seeking to expand, but what is unique about Pioneer Investments is that while it is in this very position, it also has the advantage of a ready-made global presence. Pioneer’s global team is aiming to use this unique position to fuel an aggressive drive into the institutional market.

The firm, based in Boston, Dublin, London, Milan and Singapore, has a distinct approach to winning business and running the resulting money, which it aims to apply uniformly across the world.

In Italy, where retail banks have strong brands, evaluation of the impact a partnership with a delegated manager could have on the commercial network is a high priority,says Max Nardulli.

European demand for ETFs is expected to grow in 2005 as investors seek low-cost exposure to new asset classes. Paula Garrido reports.

For the last few years the market for exchange traded funds (ETFs) has been experiencing continuous growth. According to a report by Morgan Stanley, assets under management in the sector were $260bn (€194bn) at the end of October 2004, with 326 different ETFs listed on 29 exchanges across the world and managed by 38 managers. From January to the end of October 2004, ETFs have managed to attract more than $1bn from investors, representing a 5 per cent growth of assets under management. More interestingly, the European ETF market experienced a 15.7 per cent rise in assets since the beginning of 2004.

Lyxor AM’s launch of the first ever ETFs based on eurozone government bond indices has gone down particularly well in France and Italy.

It is a staggering fact that the European-listed ETF market in 2000, consisted of only six funds, while there are currently 111 listed funds valued in excess of $30bn (€22bn).

While the industry is slapping itself on the back for creating some profitable new business, many people missed a small revolution in the exchange traded fund sector. In February last year the first ever European ETF, based on a bond index, was launched.

It was not a fact missed by asset management company Lyxor AM, a wholly-owned subsidiary of the Société Générale group. Already a leader in the European market and responsible for more than 25 per cent of all assets gathered in ETFs.Lyxor AM is competing fiercely for the first place position with the global giants of ETFs, Barclays Global Investors’ subsidiary iShares.

As a result of education and publicity Deutsche Börse finds that German retail interest in exchange traded funds is growing strongly.

Continued good news from the exchange traded fund (ETF) market over the past 12 months must have had shareholders in Deutsche Börse rubbing their hands in glee. Yet again its XTF segment, created especially for exchange traded funds, dominated the European market and for once in the financial industry, left the London Stock Exchange coming well back in the race.

ETFs can offer portfolio managers a cheap, prepackaged product closely tied to a benchmark, that is easy to use in short-term asset allocation shifts.

Chris Sutton mulls over the concept that at some point in the future the ETF market could take sales from the passive mutual funds, as institutional investors recognise its benefits. He will not be drawn specifically, but simply says things are looking good for the ETF business.

As chief executive of iShares for Europe and Asia (ex Japan), Mr Sutton has good reason to be looking optimistically to the future.

At the same time that iShares, the ETF arm of Barclays Global Investors, continues on its role of evangelising ETFs and educating the institutional investor to the ins and outs of ETFs as efficient and cost-effective investment tools, their average daily trading volume has passed the $13.4bn (e10bn) mark globally.

While life insurers would happily outsource all their assets to the right manager, most are content with a combination of internal and external management.

Morant Wright’s Japan fund is running rings around its larger and more established competitors, but the company simply puts this down to good timing.Roxane McMeeken explains.

Survey finds Dublin’s fund promoters have unique form of evaluation.

The Bank of New York (BNY) has won a mandate for the split administration of Franklin Templeton’s UK Oeic (open-ended investment company) range of eight funds.

The split brief, which began on December 13, covers transfer agency and administration services including reconciliation and settlement. But Franklin has retained voice contact to service clients. Staff at the firm will also have terminals on their desks with client data provided by BNY for the Ł210.4m (€305.6m) Oeic.

The granting of the mandate follows the relaunch of Franklin Templeton’s Oeic in 2003. Paul Brady, director of international transfer agency at Franklin, said: “Before the re-launch, we were still carrying out the transfer agency manually. With the re-launch of the Oeic and the expected growth in assets, we decided it was the right time to automate the transfer agency. We chose BNY because it was strong technologically and was flexible in its offering.”

The practice of “crossing” should receive a boost in Europe as a result of ITG Europe’s acquisition of E-Crossnet, a rival network in the direct matching of buyers and sellers of shares.

On November 25, 2004, France’s securities regulator the Autorité des Marchés Financiers (AMF) published its réglément général, defining the guidelines for French onshore hedge funds and hence officially allowing their creation. Two other types of documents are also to be released soon by the AMF: the instructions on procedures and specific features (procedure of agreement, procedure of declaration, specific features on the prospectus).

Roxane McMeeken reports on the qualities fund managers with overseas aspirations should look for when selecting a transfer agency provider.

It is a safe bet that as a fund manager, you do not find transfer agency (TA) very exciting, much less glamourous.

But if you have ambitions to be a major global player, it will be necessary to sell products in more than one country with the minimum hassle, and TA is the vital machine you need to achieve this complex goal.

New regulations are forcing investment firms to outsource functions previously untouched, says Howard Mannion.

Securities services providers are finding it hard preparing for the new international accounting standards given the needs of clients are expected to vary greatly. Roxane McMeeken explains.