UK/US - US fund managers have increased their market share of UK pension fund investments over the past year.
Major changes in the UK pension investment landscape have led to the entry several US players who can offer expertise in global equities and specialist bond management.
According to an annual survey by consulting and actuarial firm Hymans Robertson, Goldman Sachs Asset Management is now the seventh biggest UK pension fund manager (£22bn) and State Street the eighth biggest (£20bn), gaining ground largely due to its acquisition of Gartmore’s passive business. This compares to no US players in the table for 1996, for example. John Hastings, a partner in Hyman’s investment consultancy practice, Glasgow, explained that the success of US players here is largely down to a diminished use of balanced or multi-asset strategies at pension schemes, as well as a preoccupation with UK securities by some UK fund managers, which has left a significant gap in the market. According to Hastings, with some 50% of global market capitalisation in US securities, this has left some UK managers with a far from “convincing platform” to manage international stocks.
“[US managers] have come in here with scale. Not all US managers are big but they have a lot of global assets under management,” he said.
“[Also] until very recently the UK bond market was heavily based on gilt-heads securities and its only recently that credits and corporate bonds have come into that picture. Historically US managers have always managed an aggregate portfolio with [for example] mortgage back securities and asset -backed and corporate bonds. They were able to come in with a considerable process for credit management already in place.”
Hasting also added that there is increasing competition among foreign players to secure a piece of the UK action.
“The word has got out. In the first instance it would be the likes of the Fidelitys and the Capital Internationals that were making the running in this area. But other US managers have noted the success of some of the big players and are wanting a part of that.”
Such players include the likes of Wellington Management, Western Asset Management and MFS, the latter of which has had some success breaking into continental Europe.
Hastings also points to the rising number of fund of fund managers which is also churning out big US contenders such as SEI Investments and Frank Russell.
Separately, Legal & General Investment Management remains the largest manager of UK pension funds with £67bn under management. Barclays Global Investors moves up to second (£60bn) pushing Merrill Lynch Investment Managers (£54bn) down to third.
The Big 50: overview of the largest UK pension fund managers 2002 is available from www.hymans.co.uk.
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