International News - 28 October 1999

Legg Mason has become the latest US mutual fund manager to buy into the European market, with the purchase of UK fund manager Johnson Fry for about US$70 million, the first interna-tional acquisition by the 100- year-old group.

Legg Mason has become the latest US mutual fund manager to buy into the European market, with the purchase of UK fund manager Johnson Fry for about US$70 million, the first interna-tional acquisition by the 100- year-old group.

The purchase gives Legg Mason a toehold in the rapidly expanding mutual fund market in Europe, joining bigger rivals such as Vanguard Group and Alliance Capital. Johnson Fry has about US$2 billion in funds under management.

Locally registered mutual fund assets in Europe are expected to surge 79 per cent to US$4 tril-lion by the end of 2002, from $2.25 trillion last year, according to US research group Cerulli As-sociates.

By contrast, US mutual fund assets should grow 50 percent to $8.7 trillion by the end of 2002, according to Cerulli.

London-based Johnson Fry is Legg Mason's third financial services purchase in the past two months. The company bought 50 per cent of a trust company affiliated with law firm Bingham Dana LLP earlier this month and purchased Berkshire Asset Management last month. Both pur-chases were part of the company's plan to bolster its business with high net worth individuals.

Legg Mason is one of the fastest-growing US mutual fund managers, thanks largely to Bill Miller, who runs the US$11.4 billion Legg Mason Value Trust.

Miller, who was named one of the three 1998 managers of the year by research house Morning-star, helped Legg Mason climb to number 14 in sales among the top US fund managers in the first half of this year. It ranks number 42 by asset size, according to Financial Research.

Johnson Fry focuses on selling mutual funds to individual investors in the UK. It reported a pre-tax loss of about 1.5 million pounds in the six months to June 30.

Johnson Fry has reorganised its business over the past three years by closing or selling its non-fund management businesses, including a health insurance unit. Johnson Fry was founded 30 years ago by Charles Fry who still owns 10 per cent of the group.

Colonial New Zealand has signalled an intention to offer banking services within the next year.

Head of Colonial, David May, says a selective number of banking products will be rolled out over the next few years to complement the company’s strong presence in the insurance, superan-nuation and funds management market in New Zealand.

He says Colonial will be able to use the strong banking expertise of its Australian parent, which owns Colonial State Bank.

Local pundits expect the New Zealand products will closely follow those offered by Colonial State Bank in Australia and to focus mainly on the mortgage and lending markets.

Dutch bank ABN Amro expects the recent expansion of its Asia-Pacific operations to increase the region's contribution to group profits by 15 per cent in three years, up from less than 10 per cent currently.

Sergio Rial, ABN-Amro regional chief executive officer, says he expects growth to come mainly in consumer banking.

Rial was speaking at the launch of ABN-Amro's retail banking business in Singapore, acquired in May this year from Bank of America, along with other Bank of America businesses in Taiwan and India, in a deal worth about US$200 million. The acquisitions are part of a regional expan-sion that has included taking a controlling stake last year in Thailand's Bank of Asia, and moving in April to acquire a presence in the Philippines, through the Great Pacific Savings Bank.

Citigroup, the biggest financial services group in the US, has posted its second best quarter ever after Salomon Smith Barney turned around steep losses.

Citigroup, formed a year ago by the merger of Citicorp and Travelers Group, was among a clutch of financial services companies reporting third-quarter results. J.P. Morgan, Bank of New York and Bank of America also demonstrated a stronger trend.

Citigroup's net income soared 236 per cent to US$2.44 billion, from US$729m in the same quarter last year. The results were just shy of Citigroup's record net profit of US$2.45 billion posted in the second quarter of this year.

US and UK fund managers are buying shares in continental European companies at the fastest rate since 1995, according to Merrill Lynch.

The investing trend helps explain why France's CAC 40 Index has risen 0.5 per cent since mid-July and Sweden's OMX index has gained 3.5 percent, while the US's Standard & Poor's 500 In-dex has fallen 4.6 per cent and the UK's FT-SE 100 Index has declined 4.8 per cent.

Many of the investors in Merrill's survey, particularly those in the US and Europe, report that they're holding more cash than a year ago.

Canadian financial services group Mouvement des caisses Desjardins has teamed up with Credit Union Central of Canada to sell each other's mutual funds nationally throughout Canada.

Desjardins will start by selling seven mutual funds developed by Credit Union's mutual fund unit Credential Group. Vancouver-based Credit Union, in turn, will sell four new mutual funds that will invest in underlying funds managed by Desjardins Trust, a unit of Mouvement Desjardins.

The alliance helps the Mouvement Desjardins expand beyond the mostly French-speaking prov-ince of Quebec. Credit Union has assets of C$50 billion (US$33 billion), has 450 credit unions, or cooperatives which provide financial services, across English-speaking Canada.