Sponsors seem to be heeding the advice to diversify their assets, and are seeking more active managers, according to the results of Pensions & Investments' 1993 new business Scoreboard.
The growth in new assets in 1993 was spread among different types of managers, with no one style dominating dollar commitments.
While indexers continued to lead in gains among managers with more than $10 billion in assets, total dollar commitments dropped 0.6% from last year's numbers, from $41.04 billion to $40.77 billion. Some managers, most notably midsize firms in the $1 billion to $10 billion range, did well enough last year to move up to the larger category, which affected the standings throughout the survey.
The Vanguard Group Inc., Valley Forge, Pa., was first among managers with more than $10 billion in U.S. tax-exempt assets under management, with an overall gain of $6.57 billion, helped by $4.58 billion in new indexed equity. Vanguard also was first among gainers in domestic balanced funds, with $1.21 billion in new business, and topped the GIC gains with $2.09 billion. Vanguard also was second in its group in domestic equity new business, with $2.01 billion in new assets, and fifth in new domestic fixed-income business, with $1.16 billion.
"We did have a large chunk of growth in the last year," said Mike Daniels. staff analyst-institutional marketing. Besides introducing some new funds, the firm brought in more than $4 billion in assets from new clients, not including cash flows. Total new assets from new business and supplemental contributions from existing accounts totaled $11.94 billion, which brought Vanguard's institutional assets as of Sept. 30 to $37.28 billion.
Vanguard was not ranked among the top 10 last year.
Bankers Trust Co., New York, dropped from second to third in overall gains, with $5.19 billion in new business, a 34% drop from last year's totals. The company, which is known primarily as an index manager, also showed a drop of 43% in new indexed assets. Bankers Trust announced a strategy shift last month, saying it would boost its active management and its use of investments based on derivatives products.
In new domestic equity assets, Bankers Trust dropped from second to fourth, because of a decrease of 54% from a total of $3.18 billion last year, and dropped from second to fourth in domestic balanced gains, with a 50% drop in new business from last year's $502 million total. The firm also dropped from fourth to seventh among gainers in international/global assets, with a 53.8% drop in new business.
Bankers Trust's largest gain was in GICs, where it brought in $1.74 billion in new business, but an 8.4% drop from last year, dropping from first to second among GIC managers. It also brought in 29% more new domestic fixed-income business to rise to sixth from 10th.
Pacific Investment Management Co., Newport Beach, Calif., rated fourth among all managers in the $10 billion and over category, with $3.85 billion in new business. PIMCO was fifth in domestic equity gains, with $1.34 billion in new business, fourth in domestic fixed-income gains, with $1.45 billion, and sixth in international/global business gains, with $1.07 billion.
Despite an 11% drop in new assets to $6.14 billion from $6.9 billion, State Street Global Advisors, Boston, rose to second from third. It was helped by a 32.8% increase in new domestic equity to $3.85 billion, which put it in first place in that asset class. State Street also led in new indexed business, with an additional $4.58 billion in equities under management, but that figure was down 4.5% from last year's.
Among firms with $1 billion to $10 billion under management, last year's trend toward gains in fixed-income and international business continued, although total new commitments among the top 10 dropped. New business among the top 10 gainers totaled $11.84 billion, compared with last year's gains of $13.93 billion.
Still, individual managers in the top 10 showed growth. Active managers such as Standish, Ayer & Wood Inc., Boston; Payden & Rygel, Los Angeles; and First Quadrant Corp., Pasadena, Calif., grew enough to move into the top 10 gainers in the over $10 billion category in 1993. Standish, Ayer & Wood went from second in the $1 billion to $10 billion category to ninth among managers with more than $10 billion, with $2.65 billion in new business. First Quadrant went from third among the $1 billion to $10 billion group to eighth in the over-$10 billion group, with an overall gain of $3.11 billion.
IDS Institutional Retirement Services, Minneapolis, experienced a 44% growth in new business, climbing to first place among its group from eighth, with $1.37 billion in new business. That growth included a 46% jump in new GIC business, from $510 million to $954 million.
IDS' total growth was due to bringing in some large new clients over the last year, including full-service contracts with Hershey Foods Corp., Liz Claiborne Inc. and Pillsbury Co., said Louise Nemmers, marketing manager.
"We have upscaled our market. We're now looking at plans that have over 5,000 employees and clients who are looking to outsource most of the administrative tasks associated with the plan," said Ms. Nemmers.
The company benefited from sponsors wanting to spread their assets around and adding investment options to comply with 404(c) regulations, she said. The growth in GICs is due partly to IDS' pooled synthetic GIC, which has been popular among sponsors that want to diversify away from insurance companies, said Ms. Nemmers.
"A lot of plans want more options and are looking at other places in the spectrum," she said. "Also, 404(c) has caused some sponsors to widen the range of options they offer."
Nicholas-Applegate Capital, San Diego, Calif., an active equity manager, led domestic equity gains with $1.1 billion in new business, and was second overall. Growth came broadly across all areas, said Pete Johnson, director of client services and marketing for the firm's institutional side.
Nicholas-Applegate is known primarily as a small-cap equity manager, but it brought new business in other strategies, including mid-cap stocks, convertibles and systematic management portfolios.
"It was a case of getting communication out on all those other strategies, instead of being only a small-cap manager - that's what people know Nicholas-Applegate for," he said.
Assets are moving down the capitalization ladder, which helped Nicholas-Applegate grow the mid-cap area, said Mr. Johnson. A lot of sponsors were seeking to further diversify and rolled over large-cap and consumer stocks into that class, he said.
Smith Barney Capital Management, New York, led gains in domestic fixed income, with $1.15 billion in new assets, but remained in sixth place overall, despite a 10.1% increase in new business. Morgan Grenfell was first in international/global new business, with $1.17 billion, which made it seventh overall; Fidelity Investments was first among balanced fund gainers, with $298 million, and fifth overall, with total gains of $1.18 billion.
Among real estate managers, The Yarmouth Group Inc., New York, showed a growth spike of $850 million in 1993, compared with $110 million in new business last year, to place first in the $1 billion to $10 billion group. Equitable Real Estate, New York, and John Hancock, Boston, were again first and second in the $10 billion-plus group, with $370 million and $204 million in new business, respectively.
Yarmouth's growth was due to taking over "a major portfolio" at year's end and a new commingled fund formed last year, said David Hodes, principal. Yarmouth's also sold assets last year, so its $6.8 billion asset base stayed at roughly the same levels as last year.
The new institutional portfolio represents more than $600 million in new business, and is invested in major regional shopping centers nationwide. Investors in the portfolio include both corporate and public pension funds, said Mr. Hodes, but he declined to disclose them.