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One afternoon at the end of September, John Boneparth, managing director at Putnam Investments in Boston, got an unexpected call from one of the firm's US-based pension clients. The client informed him that Putnam had been short-listed for a new mandate, and would be expected to make a presentation to the board in three weeks time. The mandate was for the firm's UK-based pension fund. Earlier this year, a French company was looking for a new equities manager for its pension scheme. Although it had a strong relationship with a French fund management firm, it couldn't award it the mandate because the asset manager couldn't service the company's local pension funds in the Netherlands and the UK.
The common factor in each case is that the client was a multinational company with interconnected local pension funds. These networks mean that a fund manager needs to know when a client flaps their arms in Tokyo, or else it could stand to lose a mandate in NewYork. Multinationals are the new force for change in global money management.
In order to squeeze more value from their fund managers, they are evolving the organizational structures of their pension funds. They are setting up central units to coordinate their local funds, and drawing up lists of preferred providers that will be used throughout their global network.
To be eligible managers have to be able to service pension funds in any of the corporation's business centres. Strong performance and a good domestic infrastructure will no longer be enough to win local mandates.
Once a firm gains admission to the preferred provider list, it can be fast-tracked onto the shortlist for mandates anywhere in the world. The multinationals are going to be offering far more assets to far fewer firms. In return they will be demanding higher levels of service, and a lower level of fees.
The Unilever pension fund is certainly not reluctant to exercise its power, as illustrated by its landmark legal case against Merrill Lynch Investment Managers, due to come to court before the end of the year.
Unilever was one of the first multinationals to look at co-ordinating its pension funds across the globe. It now has a list of eight preferred providers - four for...