BAM says there is just 1 per cent overlap between its international fixed income and equity operations – with business coming in from Asia as well as Europe – and MassMutual’s domestic equity, bond and microcapital briefs focused on US clients. This means there are no consolidation issues.
But there is no lack of work to be done post-merger. The Baring name was sullied by the Leeson “rogue trader” scandal of the mid-1990s. BAM had no involvement in this, but mud tends to stick. Also, most industry observers are still surprised when they realise how small BAM is. Despite its confident and global pronouncements on over-exposure to the US, bullish calls on Korean equities and general expectations of a decoupling between eastern and western economies, BAM’s business relies predominantly on UK assets and clients.
Less than a quarter of BAM’s assets originate from North America, 14 per cent from the Pacific region – where Baring opened an investment management office 25 years ago - and 14 per cent from continental Europe.
This will clearly be a challenge for MassMutual, which aims to deploy Baring’s “highly recognised franchise and global asset management capabilities” to provide a springboard for worldwide distribution of its own products.
While BAM has always been profitable, it can be argued it has failed to build up a critical mass of assets. Its friendly door-openers, who once did the rounds of the consultants, are now being replaced by investment professionals. The servicing of institutional clients, for instance, is handled by Kate Mundy, former head of emerging markets.
Deploying fund managers speaking directly to clients means products can be quickly developed through feedback from the technical brains – something not previously possible.
“We now service our clients from within the fund management structure,” says George Harvey, BAM’s group head of business development. “When we’re replacing people, there’s more emphasis on their background. They’re coming from an investment point of view, not client servicing.”
Some of the strategies these professionals are developing rely on pooled products, such as the targeted risk solutions enabled by BAM’s multi-manager portfolios. These are more profitable and easier to run than traditional segregated mandates. But increasing numbers of segregated briefs – such as the €60m fixed income award from Bermuda insurer Axis - are structured on a model portfolio basis. This helps minimise costs.
Despite these housekeeping points, and despite Mr Harvey’s protestations that he is interested only in return on investments, and not size of funds, it appears BAM will need to at least double its size of assets in order to maximise long-term profitability. Mr Harvey admits he has an optimum number in the back of his mind, and that he needs to increase the assets in line with the profile of the Barings name.
He is a life-long supporter of Charlton Athletic Football Club, another tightly-run London-based operation. Like BAM, Charlton has been well-managed in recent years, and has a good record for a small, old-fashioned club in the top English division. However, both need an injection of capital or inspiration to move them into regular European competition.
Yuri Bender, editor-in-chief
yuri.bender@ft.com
STATE STREET OUTGROWS LONDON PAD DESPITE DUO’S DEPARTURE
Quantitative stock-picking giant State Street Global Advisors (SSgA) has began a search for new premises. It wants to shift its European head office from London’s St James’s Square to a venue capable of absorbing growing numbers of staff.
Unfortunately, the two men responsible for much of the growth to $1400bn (€1100bn) assets under management, global chief investment officer Alan Brown and his head of European operations Nigel Wightman, have left the firm. Global assets grew 22 per cent in 2004, while European assets – in which Mr Brown and Mr Wightman had a particular influence – were up 70 per cent. Growth of non US revenues from 37 to 50 per cent of totals is now State Street’s number one priority.
Both men resigned after the appointment of William Hunt as president and CEO of SSgA. Following last summer’s death of previous head Tim Harbert, who set up SSgA’s London operation in 1991, Mr Brown had already been spending much time in the Boston headquarters as acting co-head.
He is charismatic, entertaining and inspirational. Clients will tell you that when Mr Brown comes in to pitch a mandate, you are immediately hooked. But the bank’s CEO Ron Logue and his board decided Mr Brown should stick to his own “specialities”.
Mr Wightman is a shrewd operations manager, prone to wry observations, and intimately familiar with the goriest details of SSgA’s interests in France, Belgium, Italy and beyond. He has managed for growth in an uncertain climate, but has not been afraid to make unpopular decisions. He appears to have moved on after Mr Hunt appointed Mark Lazberger, who previously ran SSgA’s Japanese operation, as head of all non-US business.
Mr Lazberger has been summoning heads of the international cells to St James’s Square to familiarise himself with the way things are run. “These Americans are very pragmatic people, but maybe they can lighten up a bit,” ventured one insider on the end of a Lazberger grilling. Nostalgia for the Brown/Wightman glory days is already setting in.
YB
