Prudential Mutual Funds is taking aggressive steps to more than double its assets to $100 billion by the year 2000.
It is looking at expanding its distribution of offshore funds, possibly through an acquisition or joint venture; it is adding to its international and growth stock fund offerings in the United States; and it continues to opportunistically hire away investment professionals from rival fund companies.
At the same time, The Prudential Insurance Co. of America, its parent, plans to target the no-load fund market. It recently announced it would acquire the Crabbe Huson family of funds to appeal to customers that prefer the direct marketing approach to load funds sold through financial intermediaries. A new entity, Pru Direct, will spearhead that effort.
Unlike other insurance giants - such as New York Life Insurance Co. and Metropolitan Life Insurance Co. - that have tapped their money management subsidiaries to subadvise mutual funds, Prudential runs its funds through a distinct entity with its own asset management subsidiary. Prudential Investment Advisors is a firm with 110 investment professionals overseeing $40 billion in 38 open-end funds. Pru Investment Advisors also runs $13 billion in non-mutual fund assets for institutions.
Surprisingly, few funds are managed by Pru's plethora of asset management subsidiaries.
One exception is Prudential Diversified Investment Strategies, Short Hills, N.J., which provides asset allocation for the $500 million conservatively managed asset allocation mutual fund.
At the same time, Pru continues to market other companies' funds through its extensive distribution network. Of the $40 billion in assets it has garnered since its 1987 inception, Prudential Mutual Funds runs $14 billion in money market funds. The rest is split among stock and bond funds, both taxable and tax-exempt. The firm also administers $8 billion in closed-end funds.
Prudential Investment Advisors runs an additional runs $13 billion in Series funds - variable annuities and variable life insurance products.
In 1995, the firm plans to focus on international equities, offshore funds and domestic growth stocks. It recently raised $125 million in an open-end European stock fund. Pru Investment Advisors has seven professionals devoted to international, and "will grow as we go forward," said Brendan Boyle, executive vice president and director of marketing.
Currently, Pru Mutual Funds offers a small-cap global fund, a global natural resources fund, a Pacific growth stock fund and the new Europe fund.
"International will be one of our major emphases in 1995," said Richard Redeker, president and chief executive officer of Prudential Mutual Funds.
Both Mr. Redeker and Mr. Boyle are relatively new to Prudential, but not to mutual funds. Mr. Redeker joined Pru in October 1993, and has 27 years in the industry at firms like Wellington Management Co., Boston, and Kemper Financial Services Inc., Chicago. Mr. Boyle has more than 15 years of experience. He joined the firm seven months ago from Smith Barney Shearson Inc., New York.
Hardwick Simmons, president and chief executive of Prudential Securities Inc., "gave me a broad and very attractive mandate," Mr. Redeker said. "We'd like to have $100 billion under management by the end of the decade."
To help achieve that goal, Pru is looking into strategic alliances or acquisitions overseas. "We're far ahead of the rest of the world in the asset management business. If distribution opportunities exist elsewhere, we're very interested. We've had a wonderful record in international and domestic equity in the last couple of years," Mr. Redeker said.
"We think we'd be a very attractive partner," he said, adding that the effort might not necessarily begin in Continental Europe but perhaps in Southeast Asia or Latin America.
Despite its international focus, the firm recently hired two domestic fixed-income managers from competing firms: Peter Allegrini, former municipal bond manager at Fidelity Investments, and Barbara Kenworthy, a taxable fixed-income manager at Dreyfus Corp.
Yet the moves do not represent an effort to bolster fixed income, per se.
"It's like in baseball. When you get an opportunity to get a top talent, you just do it," said Mr. Boyle.
Ms. Kenworthy will manage a new diversified bond fund in registration with the Securities and Exchange Commission. Mr. Allegrini will manage a municipal high-yield fund.
The firm does plan to bolster its equity marketing efforts, particularly for growth funds. Pru has been known mainly as a value manager. But growth and value "tend to be complementary styles. They have cycles at different times. Many investors are honing in on owning both. We look constantly at the possibility of new growth stock products," Mr. Boyle said.
Pru Mutual Funds relies on two channels of distribution for its funds: 5,500 Prudential Securities financial advisers in the United States and 400 overseas and 18,000 Prudential insurance agents.
The domestic channels of distribution will not be expanded in the foreseeable future, although that's "something any group like this has to look at," said Mr. Redeker. He cited the recent distribution joint venture announced between Dean Witter Reynolds Inc. and NationsBank.
Indeed, Prudential recently announced it would purchase the Crabbe-Huson funds to give it entry into no-load direct-marketed funds. That effort, Pru Direct, is separate from Prudential mutual funds.
Pru also has built a sizable business distributing other companies' mutual funds through its financial advisers - 46% of sales in the last year were Pru fund sales, 54% were of external funds.
For the last several years, mutual funds have represented about 19% of Pru Securities' retail revenues.
"We want to make mutual funds a more important part of Prudential Securities' revenue base. We allow numerous competing funds," Mr. Redeker said. The firm's financial advisers sell more than 1,000 external funds from 110 fund companies, including such big names as Putnam Investments, Alliance Capital Management, Oppenheimer Capital Corp., Massachusetts Financial Services and Franklin/Templeton Inc.
"I don't know of another major national brokerage firm with as many selling agreements as we have," Mr. Redeker said. Pru was in the business of selling other companies' funds years before Charles Schwab & Co., San Francisco, and Fidelity entered the fray, he noted.
To tackle the 401(k) market, Pru has attracted $1 billion for its bundled product, PruWrap, which is based in Edison, N.J., where its transfer agent operation is located. It also makes its mutual funds available to 401(k) clients through Prudential Securities marketers.