Standard Buys Out Americas Trust

South Africa's Standard Bank Group has purchased three emerging market debt funds with roughly $100 million in assets under management from ailing Americas Trust Bank (ATB), and is creating a platform of international funds with the intention of launching itself into the asset management business, senior officials at Standard said.

This platform, which will be run by a new entity called Standard Americas Asset Management, will initially include the Liquid Reserve Fund, the DMA Fund and the Latin Yield Fund from ATB, as well as six funds already being managed by Standard. The number of funds is likely to grow, however, and several additional emerging markets investment vehicles are already being considered for launch in the near term, said Jonathan Binder, a senior investment officer at Standard who came over from ATB during the acquisition.

Over the past four to five years, Standard has become more active on the buy side, launching a local-currency fund dedicated to emerging markets, a South African hedge fund, a managed futures fund and a global telecom equities fund. The bank has also been managing a European high yield fund and a fund dedicated to international telecom debt on a proprietary basis, and will open these funds to the public in the next few months. Overall, these funds will provide Standard Americas with upwards of $100 million in assets under management in addition to the former ATB portfolios.

These investment vehicles will be paired with Standard's existing international funds under the management of Jeffrey Engel, global head of high yield investments, and a group of portfolio managers including Molly McKeown, Caroline Gangi and Nigel Bullock.

By pooling their management teams together, Engel and Binder hope to take advantage of the inherent similarities of high yield and emerging markets. "The risk appetite of the sectors is probably not dissimilar," Engel said, "and whether we're analyzing a company like Tricom or Supercanal, it's all pretty much the same credit analysis that we're doing here."

Standard's solidification of its buy-side business is a natural development for an institution that has basically functioned as a dedicated emerging markets investment bank specializing in mining and trade finance, Binder said.

"I think asset management was always a logical extension of their operations, not only as an extension of their emerging markets activities but also because asset management is a good business line to be in. It's good quality income," he said.

Joining Binder in the operation of the three former ATB funds are portfolio manager Charles Cassel, senior analyst Marc Heimowitz, and trader Angel Hernandez, as well as a three-person support staff.

But the purchase of ATB's portfolios was as much a consequence of the Miami-based bank's dwindling role as a money manager as it was a result of Standard's new focus on asset management, said a source familiar with the transaction. While many fund managers took losses due to the Ecuadorian financial crisis of the past two years, ATB was hit particularly hard because of its reliance on Ecuador's Banco Popular as a principal distributor.

When the financial situation in Ecuador worsened, customers rushed to access their funds and Banco Popular was left without a clientele. As a result, ATB's former chairman, Arturo Vinuenza began selling off funds, auctioning off roughly $120 million in assets under management before initiating negotiations with Standard earlier this year.

"We needed to find a platform that would enable us to re-launch the fund through other distributors, and Standard Bank has for some time been looking to create an asset management business," Binder said.

In forming Standard Americas, both parties have found what they were looking for: The representative offices Standard has throughout Latin America, North America, Asia and Europe will provide the funds a ready-made institutional banking network, and in return, Standard has been provided with a base from which it can grow an asset management concern, Cassel said.

Both the Liquid Reserve Fund and the DMA fund are fairly conservatively managed vehicles that are distributed through the American Express private banking network and have traditionally been marketed to high-net-worth Latin American investors. Totaling $77 million, the Liquid Reserve Fund is invested exclusively in Latin American sovereign and bank debt with a maximum maturity of one year and it maintains a minimum 10% position in U.S. Treasurys. The $25 million DMA fund uses a similar structure but can invest in securities with average maturities of up to two years and is not subject to a mandatory allocation to U.S. government bonds. The Latin yield fund, which was liquidated during the course of the Ecuadorian crisis, will be re-seeded with $5 million and will be marketed as a multi-currency global total return fund dedicated to the emerging markets.