FRANKFURT - Commerz International Capital Management's purchase of a majority stake in Martingale Asset Management L.P. won't be the German bank's last purchase of a U.S. money manager.
Heinz Hochmann, executive vice president of Commerzbank and head of its asset management activities, said the bank is still "open to a more sizable" acquisition in the U.S. market. But he added the bank is not rushing, and purchases depend on personal fit. He said officials of Commerzbank and Boston-based Martingale have known each other for six years.
The deal with Martingale marks the second recent move by Commerzbank AG to expand its international asset management capabilities. Recently, the bank acquired 75% of London-based Jupiter Tyndall, which manages 4 billion ($6.4 billion) in assets.
Commerz International will acquire 60% of Martingale with an option to increase to 70% by 1998. Terms were not disclosed.
In addition, Commerz International, the bank's international asset management arm, is setting up a Singapore office, has an asset management operation in Taiwan, and recently added a portfolio manager in its Tokyo office.
The firm manages 8 billion deutsche marks ($5.76 billion), 70% of which is invested in bonds. Eight-year-old Martingale manages $425 million in assets, primarily in active completeness funds and long-short strategies. The bank as a whole manages some $70 billion. The acquisition will help Commerz International expand its international equity product line by integrating Martingale's quantitative skills.
Traditionally, Commerz has offered a global equity product that relies on active country allocation and passive stock selection outside Germany. But bank officials have come to realize there is a limited market for such products, said Paul Burik, deputy managing director and chief investment officer.
To build an active international equity product, Martingale will develop active stock-selection models for various markets. Commerz International also will use stock-picking skills of Jupiter professionals, as well as those from its Frankfurt, Tokyo and Singapore offices, Mr. Burik said.
Commerz also may offer individual country products in other major markets, such as Japan and Britain, he said.
Mr. Burik said Commerz officials are buying a majority stake in Martingale for its technology. Any future purchase might involve a manager with a larger asset base.
For Martingale, the new relationship will offer greatly expanded distribution. Its research will be used in mutual funds and other bank products, in addition to Commerz International's separate account products.
"I think distribution for a little firm is pretty tough," Bill Jacques, chief investment officer of Martingale, conceded. He said the firm had wanted to expand internationally for some time.
Commerz is an attractive partner because it keeps its hands off the businesses it acquires, Mr. Jacques said. And by retaining 40% of the stock, Martingale partners will be able to benefit from the firm's expansion, he explained.
John Sweeney, assistant treasurer at Saint-Gobain Corp., Valley Forge, Pa., said he has no concerns over the $44 million completeness fund managed by Martingale for his company's $700 million pension fund.