Despite predictions that global equity markets will not perform as strongly in 2006 as they did last year, institutional investors’ interest in the asset class is unlikely to fade. According to Mercer Investing Consulting, investment managers expect that this year will lag 2005’s double-digit returns for major global equity indices, with a particular decline expected in the emerging markets area.
However, institutions investing in global equities are more concerned about the long-term than about short-term results. Taking this into account, it is unlikely that lower returns expectations for the near future stop institutional money going into the asset class.
Global equity is probably one of the areas where competition among managers is most fierce. The demand from investors is high but there is also an increasing number of providers who have to fight, not only to win new mandates, but also to keep their existing clients.
According to data compiled by FT Mandate Research, during the 12 months to the end of January, 85 global equity mandates were awarded with a total value of €4.9bn. These figures do not include the global equity part in any balanced mandates given away during the same period.
Grantham, Mayo Van Otterloo (GMO), managed to attract more money than any of the managers on the list, representing a total of €935m. The global investment management house received two mandates from two different UK local authorities. The first one, awarded in February 2005 and totaling €644m, came from the London Borough of Tower Hamlets. GMO was also appointed to manage a smaller brief of €290m by the Cheshire County Council pension fund.
In second position, in terms of new institutional assets won, is AllianceBernstein Institutional Investment Management, which managed to secure €720m from investors in the UK, the Netherlands and Sweden. The largest mandates awarded to the firm came from two UK institutions, Northamptonshire County Council pension fund (€165m), followed by a €138m brief from the Kelda Group pension fund.
Capital gains
Capital International, with global equity mandates worth €560m, and Baillie Gifford, with €377m, were third and fourth in our list of top mandate wins in the global equity asset class.
According to our data, Capital International was also the manager that managed to attract the largest single global equity mandate, a €384m brief given by the Leicestershire County Council back in March last year.
Although many of the appointments were new mandates that institutions gave away as part of changes to their investment strategies, in some cases these wins were the result of institutions replacing their existing managers. The UK business of Deutsche Asset Management was the most badly hit during the period, losing a total of five different mandates from UK clients. Interestingly, consultants Hymans Robertson offered their advice in three of these five replacements and Mercer Investment Consulting in the remaining two.
Most of these global equity mandates came from the most developed pensions markets in Europe. A total of 33 mandates came from UK investors, followed by seven from Sweden, four from Switzerland and three both from Germany and Italy.
However, according to our research, only one global equity mandate awarded during the last 12 came from the Netherlands, a €100m brief awarded by the Laurus Pension Fund to AllianceBernstein to replace the two managers previously in charge of the portfolio -ING Investment Management and Robeco Asset Management.
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