Metropolitan Life Insurance Co. will gain investment management breadth and depth - especially in equities - through its merger with New England Mutual Life Insurance Co.
And, Prudential Insurance Co. now faces competition as the insurer with the most pension assets under management.
According to data from Pensions & Investments' 1995 money manager survey, the U.S. pension assets of MetLife and New England totaled about $129 billion as of Jan. 1, 1995. Prudential and its investment subsidiaries had approximately the same amount.
Ted Athanassiades, MetLife's president and chief operating officer, was almost gleeful in his description of what the 10 money managers of New England Investment Cos., the money management arm of the New England, will bring to his company.
"MetLife has great strength of distribution in institutional markets, but we've been hampered by a lack of equity products with strong performance. Without strong equity funds from State Street Research, it's been much harder to sell our bundled programs, for instance." He said the NEIC money managers have "better performance and a broad range of styles."
NEIC includes Back Bay Advisors L.P., Boston, which managed about $400 million as of Jan. 1; Copley Real Estate Advisors, Boston, with about $4.4 billion; Loomis, Sayles & Co., Boston, with about $29 billion; and Reich & Tang Capital Management, New York, with about $1.2 billion, among others. MetLife has five money management subsidiaries, most notably State Street Research & Management, Boston, which manages about $16 billion.
"MetLife has struggled because of its lack of attractive investment options, especially on the defined contribution plan side," said Glen Casey, consultant, Cerulli Associates, Boston.
Some of State Street Research's performance has not been sterling, according to Pensions & Investments' Performance Evaluation Report.
Its Growth Equity Composite portfolio returned 18.6% in the first six months of 1995, vs. 20.22% for the Standard & Poor's 500 Stock Index, placing it in the sixth decile.
For the year ended June 30, the composite ranked in the ninth decile, returning 19.6%; for three years, it was in the fifth decile, with 13.9%; for five years, it was in the eighth decile, with 10.9%; and for 10 years, it was in the eighth decile, with 13.5%. Returns for all periods longer than one year are annualized.
State Street's small-cap growth composite portfolio ranked in the last decile for the six months and year ended June 30. It returned 8.4% for the six months, and 9.4% for the year. The three-year return, 16.9%, placed it in the eighth decile, and the five-year return, 16%, in the seventh decile.
Mr. Athanassiades stressed there is little overlap between the investment management styles and products offered by each of the 15 managers of the combined entity. He expects neither jobs nor investment vehicles will be cut.
"In this merger, overlap is just not much of a problem. We're gaining a lot of expertise in areas we didn't have it before, and I don't see that we'll need to eliminate any operations," said Mr. Athanassiades.
In fact, Mr. Athanassiades hinted NEIC may continue its pursuit of more diversity in its investment lineup through future acquisitions of mutual fund companies.
Other NEIC money managers are: Delafield Asset Management, New York; Draycott Partners Ltd., London; Graystone Partners L.P., Chicago; Marlborough Capital Management, New York; and Westpeak Investment Advisors L.P., Boulder, Colo.
The acquisition of Harris Associates L.P., Chicago, will likely be completed next month, said Larry Dwyer, an NEIC spokesman.
Besides State Street Research, MetLife's subsidiaries are: Metric Institutional Realty Advisors, San Francisco; MetLife Investment Management Corp., White Plains, N.Y.; GFM International Investors Ltd., London; and MetLife Realty Group Inc., White Plains, N.Y.
It is expected that back-office operations, such as record keeping and plan administration for 401(k)s, will move to MetLife's more advanced systems.
Under the terms of the agreement, The New England will be merged into MetLife, including transfer of all assets and liabilities subject to regulatory and shareholder approval. The New England will remain a separate subsidiary, based in Boston, with separate operations.
The 65% of NEIC owned by the New England will be transferred to MetLife; the rest of NEIC's units are publicly traded. Oversight of the 10 money managers within the stable of NEIC also will be transferred to MetLife, although their operations will continue to be autonomous from MetLife, said Mr. Dwyer.
The process is expected to be completed by early next year.