When it comes to global equity mandates the world’s largest asset management companies usually tend to be the natural choice for institutional investors.
The huge resources needed to meet client expectations when investing across the world’s changing equity markets mean pension funds and other institutions have selected the most visible market players.
However, taking into account the different investment styles and the greater diversification and specialisation within the asset class itself, the choice is not always that straightforward.
Institutional investors have recently been gaining exposure to global equities in several ways. According to FT Mandate data, investors have given external managers detailed briefs on how they want their portfolio invested. Our data shows that over the last year investors seeking to gain exposure to global equities did so via different types of mandates, ranging from “plain vanilla” global equity briefs to multi-manager strategies, from small to large caps, from active to passive, and from value to growth.
During the 12 months to the end of March, UBS Global Asset Management attracted global equity mandates worth €814m from four major UK investors, propelling it to the top of our table of global equity managers ranked by volume of reported new business wins over the past 12 months. UBS also managed to attract the second largest global equity mandate registered during that period, a €595m brief awarded by mutual company MGM Assurance. MGM selected UBS to replace Pavillion Asset Management who was previously in charge of this portfolio.
Trust in UBS’ ability to manage global equities came also from both public and corporate pension schemes, including the pension funds for the counties of Warwickshire and Surrey, and the Mothercare pension fund.
BVP Pensionskassen’s appointment of Capital International to invest €600m in World ex-Euro equities was the single largest global equity mandate of the last year. BVP – which last summer merged with VPK to create the €3.2bn VBV-Pensionskasse, Austria’s largest pension fund – also handed Capital International a second smaller global equity mandate worth €50m. The US investment house was also selected by Belgium’s General Motors Pensioenfonds and Australia’s Suncorp Investment Management to manage global equities. These four mandates add up to €778m, placing Capital International second in our table.
State Street Global Advisors seized third spot on the strength of two global equity mandates worth €615m, from two different institutional investors in the UK - the Devon County Council pension fund and the Medical Protection Society. A single mandate worth €489m brought Baillie Gifford into fourth position in our ranking. The mandate was granted by another UK public scheme, the Rhondda Cynon Taf Borough Council pension fund, following the dropping of Deutsche Asset Management from the brief.
A total of five investors who decided to change existing global equity managers during this period named Deutsche as one of the managers to be replaced. More interestingly, the five investors that said goodbye to Deutsche were all UK pension funds, which underlines the difficulties that the firm’s institutional UK operation has been facing.
Lazard, Legal & General, Schroders, Merrill Lynch and Bank of Ireland appeared at least twice in our list of manager replacements.
By looking at the companies that were chosen to do the job of those whose contracts were terminated, it is difficult to identify common patterns. However, the pension funds of three different London boroughs decided to choose AllianceBernstein Institutional Investment Management to manage their global equity portfolio. In the case of Barking and Dagenham, AllianceBernstein was selected to replace Deutsche, while Havering picked the firm to take over from Merrill Lynch. The mandate awarded by Lambeth, on the other hand, was a new brief so no replacements were made. Both Barking and Dagenham and Lambeth used Hymans Robertson as a consultant.
Our research also shows that when it comes to replacing existing managers, investors usually hire the service of an investment consultant. However, most of those awarding new mandates also use external advisers. Watson Wyatt was the consultancy firm used in most occasions.
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