PGI’s fast track to increasing international assets
Assets under management at Principal Global Investors have grown from $80bn to $155bn over the last three years. “That makes us, over that period, one of the fastest growing active managers in the US market,” says Mr McCaughan, who joined the firm nearly four years ago.
The growth has been driven by both US and international clients, with international growth strongest in Europe. “Over time we would expect to maintain the type of growth that we have had in the last few years, maybe not in percentage terms but in absolute levels” he says.
In particular, Mr McCaughan is keen to develop the company’s international (non-US) business, which currently represents 12 per cent ($20bn) of total assets, and predicts it will grow to a third of assets in the foreseeable future.
“The European is the largest piece of it [international business] right now and probably will stay like that. It really does depend on how much European clients continue to take up our products, but we are resourced to grow well over 20 per cent per annum”, he says.
The value of PGI’s funds sourced from Europe is currently $6bn.
European client demand could lead to a form of partnering, joint venturing or just a distribution agreement with PGI, says Mr McCaughan. It could also lead to an acquisition, perhaps in the currently fashionable structured products business. “We think we would be an attractive acquirer, because we have a track record of respecting and developing investment products while offering support in all areas that investment processes need,” says Mr McCaughan.
This is a clear reference to PGI’s successful strategy of providing distribution and infrastructure to the three fund management firms acquired in the last five years, while allowing them to run independently their investment and management process.
Stamford-based Spectrum Asset Management has grown to $14bn from the $1bn it managed when it was taken over by PGI in 2001, and is now the largest preferred securities manager in the US. “Important in that growth has been giving them distribution, for example in Europe, where the funds invested in preferred securities have been a strong part of Spectrum’s growth,” says Mr McCaughan.
Los-Angeles based Post-advisory Group, a high yield fixed income manager, doubled its assets to $8bn during two years under PGI’s control. The latest acquisition is Stamford-based Columbus Circle Investors, a growth-oriented equity manager, with $5bn in assets, which has benefited from the defined fund contribution market in the US opened to them by PGI. A recent partnership with US Bank will see the two groups co-operate in a joint venture to develop commercial mortgage securitisation.
