NEW YORK - 1995 has been a big year for the asset management business of Holland's Internationale Nederlanden Groep, Amsterdam.
Even as ING was looking to acquire a U.S. money manager, the collapsed U.K.-based Barings Group came on the block, and ING bought it. With a stroke of the pen, ING suddenly added about $40 billion of assets under management, bringing its total to about $180 billion.
The Barings purchase greatly accelerated ING's plans of garnering another $50 billion under management by about the year 2000. As a result, ING executives raised their goal - now targeting $240 billion under management by that year.
ING was already Holland's largest private money manager. In acquiring Baring Asset Management, ING obtained a broad international equities player - one with special strengths in far eastern and emerging markets - and one that deals exclusively with outside clients. ING Investment Management, on the other hand, focuses on the Dutch market and handles ING's in-house insurance assets as well as some mutual funds and products for institutional investors.
Not surprisingly, then, ING executives expect to use BAM as a main vehicle for expanding ING's asset management business in Europe and Asia. And for now, ING has no plans to merge the Baring and ING investment management arms.
For the U.S. market, ING had been planning a strategy different from what actually developed this year. Before the BAM acquisition, ING had been considering buying a manager of U.S. products through which ING could cross-sell its international investment offerings. But this was not what it got with internationally focused Barings.
"We still have not obtained the full range of products and still might want to go the acquisition route (in the United States), but we're being cautious," said Bert Heida, a member of ING Asset Management's executive committee. Given the high prices of U.S. money managers, "we're building on what we have and keeping our eyes open" for an attractive acquisition candidate, he said.
In the meantime, ING will be looking for growth of U.S. assets under management from Baring, its insurance business and the developing asset management activities of ING Capital Holdings Inc.
ING Capital Holdings in New York is a relatively new organization. It was formed after ING chose to relinquish its U.S. commercial banking license in 1993 and convert ING Bank to an investment bank and brokerage house. (Following the Barings deal, however, securities trading was shifted to Baring Securities, while ING Capital kept corporate lending and institutional investor activities.)
ING Capital had been engaging in proprietary trading of the company's own accounts - mostly in the debt area. But last year, in products in which it had at least a five-year track record, ING Capital began offering the products to institutional investors.
So far, ING Capital has fashioned three investment units: ING Equity Partners L.P., which invests in management buy-outs, growth financings, acquisitions and corporate restructurings; ING Emerging Markets Investors Inc., which specializes in emerging markets debt investments; and ING Capital Advisors, which offers a portfolio of senior secured corporate loans.
ING Equity Partners was formed July 1, 1994, by former executives of ING Capital's corporate restructuring group with the financial backing of ING Capital. Timothy Schantz, a senior managing director of ING Capital Holdings, would not say how much ING has invested.
This month, ING Emerging Markets Investors will unveil two groups of privately placed emerging markets debt funds - offshoots of ING Capital's activities in the emerging markets debt arena. The first group of funds will invest in a range of fixed-income, equity and derivative instruments, while a second fund will invest primarily in fixed income.
To ING Capital's Mr. Schantz, ING Capital Advisors is the most unusual. The unit offers a range of floating-rate corporate loan investment products to banks, insurance companies and other institutional investors. ING executives say institutional investors previously couldn't gain exposure to this area, except through a handful of retail mutual funds or through specialized structured vehicles.
Because of their senior secured status, corporate loans exhibit significantly higher recovery rates than bonds in the event of a default. But because of their floating rate features, they show very little price sensitivity to changes in interest rates, ING said in a news release. Thus, they have "many of the return dimensions of high-yield fixed-income funds but with more limited price volatility," said Mr. Schantz. He pointed out the "floating rate characteristics" of the instruments somewhat resemble those of money markets.
Mr. Schantz ING Capital as a "real pioneer" in developing investments in the floating rate corporate loan arena. All of the new ING Capital products will be marketed to U.S. and non-U.S. clients.
Looking forward, ING Capital is considering a specialized product for the real estate market, said Mr. Schantz. One possibility: creating a fund that would target the Mexican real estate market.