Barclays Abandons BGI Sale Plans

August 1, 2002 ( - Barclays Plc has decided to expand its fund management arm Barclays Global Investors (BGI) rather than putting it on the auction block.

“Following a recent thorough strategic review, we see new opportunities for BGI to further extend its global leadership and accelerate growth in profitability and contribution to the group,” Chief Executive Officer Matthew Barrett told a news conference, according to a Reuters news report.

There had been speculation that Barclays was in talks over a possible $1 billion management-led buyout deal for the US.-based unit, which specializes in passive fund management (see Leading the Followers ).

Analysts said it may not have found a buyer willing to pay up while volatile markets continue to depress the performance of fund management companies.

Although BGI is one of the world’s biggest asset management groups, it accounts for a tiny fraction of Barclays’ overall profits, according to Reuters. The value of funds under management has declined amid the slump in equity markets, while at the same time costs have been rising.

BGI made pre-tax profits of 60 million pounds in the first half of the year, up from 37 million in the same period last year. Assets under management slipped to 530 billion pounds from 548 billion pounds.

BGI’s product mix was suited to the market’s needs, Barrett said. BGI has branched out to new markets such as Exchange Traded Funds (see First Fixed Income ETFs to Trade Today , Barclays Introduces ETFs , Barclays Launches EAFE ETFFive Global ETFs Debut on AMEX .)

Barclays reported that its half-year pre-tax profits fell 6% to 1.75 billion pounds and admitted its performance “has not met our own high standards.”

see also Dunn to Leave BGI Post Due to Health Problems