Barings unit turns tide after wave of redemptions
A YEAR after the Nick Leeson crisis, assets under administration at Barings/International Fund Managers Ireland (IFMI) in Dublin's docks, are now back at $2.4 billion. The company claims to have "turned the tide", following a wave of redemptions in Barings funds. New jobs are on the way at the Irish operation, it says.
The company reports growth through synergy with its new parent, tlie Dutch bank ING. A $40 million Korean fund will shortly be administered from Dublin, following an introduction made through ING's Soeul office. IFMI employs 84 people at Dublin's International Financial Services Centre and its sister company, Barings Ireland, employs 15.
Staff in Dublin have continued to participate in a bonus scheme, right through the crisis. The staff bonus paid last year - subsequent to the ING takeover - amounted to more than 10 per cent of salary.
The bonus will also be honoured this year. The average age of the firm's well paid and "embarrassingly well qualified" staff, is 28 years. Many are accountants and lawyers with good degrees.
There was a significant redemption of Barings stock - a "knee jerk response,", according to IFMI managing director Mr Vie Holmes - in the wake of the Leeson crisis but there are now more subscribers than redemptions.
"Money is coming back. The investment performance is improving. 1995 is behind us and we are very optimistic for 1996. We hope to attract a lot of new funds through ING. The firm is still very profitable. We'll be employing an extra ten people this year," Mr Holmes said.
The Barings crash caused enormous shock waves in the City of London, as the blue blood merchant bank - which was established in 1762 - had a high reputation and a top pedigree of clients. Barings' Irish operation, which was seen as a prize catch for the IFSC, has been profitable since it started.
Last year was a slow one for Barings VIFMI. However, the level of enquiries "increased dramatically" toward the end of 1995 and this has continued, said Mr Holmes.
"We are encouraged by recent developments. Existing clients such as South Africa's largest life assurance company Old Mutual - have asked us to administer new funds," Mr Holmes said. The focus now, is on attracting new third party clients to Dublin from all parts of the world, he added.
Fund management involves the active selection of stocks for an investment portfolio. Fund administration on the other hand, is geared to servicing the clients of a fund. IFMI administers 86 funds, with a total of over 20,000 shareholders. The firm calculates the net asset value of the funds. Checks are run on a daily basis. IFMI produces interim and annual accounts for the unit holders or shareholders.
Assets under administration at the Dublin arm have climbed steadily from $500 million in 17 funds in 1991. Initially IFMI's only client was Barings. Barings funds still account for 70 per cent of IFMI's business but now a whole range of other funds are administered too. Customers include the United Bank of Kuwait, Saudi International Bank, Hambros and Banque Paribas.
Vic Holmes is a North of England man, who worked in Guernsey for eight years. He moved to Dublin in 1990, to set up IFMI's Irish arm. The firm's parent has the largest fund administration business in Guernsey, with assets of £3.5 billion sterling under ad ministration.
A separate custodian or trustee company known as Baring Brothers (Ireland) was set up. Its role is to act as the guardian of the sets under management, with the management functions being carried out by the fund management subsidiary. Guernsey is outside the EU.
A growing shortage of skilled staff threatened to choke off growth in the Channel Islands fund management operation. The problem with Guernsey was not one of attracting business but of continuing to service it. The only way to get employees was to attract them from other companies.
The company located in Ireland, largely because "there were a lot of educated people in Dublin seeking employment". The cost of hiring staff in Luxembourg is substantially greater that in Ireland. In addition there was a language problem.
A lot of people in Luxembourg are not good English speakers and IFMI would have had to recruit in Belgium. In 1991, Barings transferred to Dublin most of its own offshore funds from Hong Kong, the Bahamas, Bermuda and Guernsey.