The rich keep getting richer in the money management world.
Large, multiproduct money managers continued adding assets at a fast clip last year, according to the Pensions & Investments New Business Scoreboard.
Many gains were achieved thanks to strategic transactions -and in spite of them in some cases. Managers such as BZW Barclays Global Investors, San Francisco, formerly Wells Fargo Nikko Investment Advisors, saw gains as a result of an acquisition. On the other hand, First Quadrant Corp., Pasadena, Calif., overcame the handicap of being for sale to reap large asset gains.
The top five managers with more than $10 billion in overall assets added net new assets of $66.9 billion, a 17% increase from last year's $57 billion gain. International/global mandates and indexed assets were particularly active, although increases came in all asset classes.
State Street Global Advisors, Boston, continued to push its growth plans, gaining $21 billion in net new assets in 1995. State Street was among the top gainers in nearly every category. It was first in domestic fixed income gains with $4.9 billion and first in new international/global assets with $8.2 billion; it ranked second in domestic equity and balanced gains, with $6.7 billion and $726 million, respectively, in new business.
All of State Street's business lines were very strong last year, said Nicholas A. Lopardo, chairman of State Street Global Advisors. A lot of the new business came from non-U.S. clients investing globally, he said. State Street leveraged its experience as a global manager and as one of the earliest international indexers, he said. Rather than be a U.S. manager investing overseas on behalf of U.S. clients, State Street works directly in five major investment centers overseas - London, Paris, Sydney, Tokyo and Montreal - in addition to its Boston base, said Mr. Lopardo.
The firm has had a strong international focus since 1987, when State Street Bank & Trust Co. began developing its money management business, said Mr. Lopardo. It was among the first firms to create index funds pegged to the Morgan Stanley Capital International Europe, Australasia Far East Index, he added.
Indexing was very good to State Street on the domestic side as well. It gained $2.2 billion in new business in indexed fixed income in 1995, a far cry from no gain recorded in 1994.
Enhanced indexed products helped the fixed-income area grow about 233% overall, adding about $6.5 billion in total fixed-income business, said Mr. Lopardo. Indexed fixed income showed strong growth in all segments, not only in tax-exempt assets, he said.
State Street so far has achieved its growth internally but it is not averse to making acquisitions, said Mr. Lopardo. He added the firm has looked at candidates, but has found no match yet. It wants to acquire a firm with a good private client base, good mutual fund capabilities in the 401(k) arena and some institutional money management business.
Fidelity Investments, Boston, was the No. 2 gainer in the over $10 billion category, with $20.3 billion in net new business, up from a $17 billion gain in 1994. Fidelity showed the largest gain in domestic equity, with $12.3 billion in new business, and was second in fixed income with $4.7 billion.
BZW Barclays improved on the 1994 growth rate of its Wells Fargo Nikko predecessor; it gained $10.2 billion in net new business, up from a $6 billion gain for Wells Fargo Nikko in 1994. It nearly doubled its domestic equity gains, bringing in $2.5 billion, compared with $1.1 billion as Wells Fargo Nikko the previous year. But it was global/international gains that showed a drastic surge, with a $5.6 billion gain, compared with a $453 million gain in 1994 for Wells Fargo Nikko.
Global presence was the main reason Wells Fargo Nikko sought to separate from Wells Fargo & Co. when it placed itself in play last April. The acquisition by Barclays PLC was meant to provide a partner with international capabilities that would allow the firm to grow globally (P&I, June 26).
The growth in global assets is a reflection of Wells Fargo Nikko's globalization efforts before the Barclays acquisition, said Frederick L.A. Grauer, chairman of BZW Barclays. Even before closing the deal in December, the firm had been growing in Canada, the Netherlands, Japan and Australia, he said. In Canada, Wells Fargo Nikko moved from the 35th largest money manager to the 22nd and it became the second largest institutional money manager in the Netherlands during 1995, he noted.
The link with Barclays will expand BZW Barclays' presence in its existing overseas markets, said Mr. Grauer. He added it also will provide the distribution to expand into other markets where Barclays already has a presence, such as France, Germany, Italy, Spain, Switzerland, Hong Kong and Singapore.
The top 10 gainers in international/global business among the managers with more than $10 billion racked up $26.1 billion in new assets, compared with a gain of $19.2 billion in 1994. State Street and BZW Barclays were the leaders, followed by Capital Guardian Trust Co., Los Angeles, which gained $2.9 billion in global/international assets.
Indexing is the preferred first step for new pension plans in non-U.S. markets, and for those who moved to indexing in the last five years, enhanced indexing and asset allocation products are the next step, said Mr. Grauer. For example, the Japanese pension market is starting to look seriously at structured investing as it begins to move away from using insurance companies and banks for pension management.
Indexing was very good to many of the top players in money management. The top three indexers - the same firms as last year - gained $27.4 billion in assets, compared with $23.6 billion in 1994.
"I guess passive was massive in 1995," said Mr. Lopardo. He noted large plan sponsors were concerned about outperforming the indexes in a year when the Standard & Poor's 500 rose nearly 37%.
State Street was the top indexer with $15.3 billion; last year it was No. 2 with an $8.1 billion gain. BZW Barclays was second for 1995 with a gain of $9.2 billion, compared with Wells Fargo Nikko's $6.5 billion gain in 1994. Vanguard Group, Valley Forge, Pa., dropped to third with a gain of $2.9 billion in indexed assets compared with a 1994 first-place finish of $9 billion. Vanguard also was No. 2 in new manager of managers assets, showing a $1.7 billion gain in 1995.
Northern Trust Co., Chicago, gained the most new manager-of-managers business with a net gain of nearly $2 billion. The bank benefited from its acquisition last year of RCB International Inc., Stamford, Conn., a global manager of managers firm.
The manager-of-managers category was dominated by large multiproduct firms, not pure manager-of-manager firms as in previous years. After Northern Trust and Vanguard, State Street was third with $800 million and M.D. Sass Investors Services Inc., New York, was No. 4 with $600 million. AMR Investment Services, Inc., Fort Worth, Texas, dropped to fifth in 1995 with a $251 million gain from second place last year.
As if to defy the conventional wisdom that clients abhor change, firms in flux were big gainers among managers with $1 billion to $10 billion. Despite a three-year stint on the block, First Quadrant showed a net asset gain of $2.4 billion for 1995. The firm, placed in play in 1993 by parent Xerox Corp., still managed to double its assets in the past three years before being sold last month to Affiliated Managers Group, Boston (, Jan. 22).
"The heart of the issue is: If you have products that serve the needs of clients, business will be attractive," said Robert D. Arnott, chief investment officer of First Quadrant. The firm saw considerable growth in global asset allocation and complete portfolio management, a strategy it added in the past two years that offers sponsors the potential to counterbalance the risk attributes of other managers in their rosters.
The sale situation had impeded client generation, said Mr. Arnott, noting the firm ended 1995 with one or two fewer clients. But with good investment results, existing clients continued to add assets and new mandates, he said. With the distraction of the sale out of the picture, First Quadrant will be able to grow even faster, said Mr. Arnott.
Boston Partners Asset Management, the firm created in May by a team of former executives of Boston Co. Asset Management, was No. 2 in the $1 billion to $10 billion tier. It showed a net gain of $2.2 billion and was No. 1 for new business in both domestic equity and balanced business with respective increases of $1.6 billion and $326 million. Boston Partners managed to leverage the relationships its founders built at BCAM to gain more than $5 billion in total assets during its first six months.
"A major commitment to infrastructure early on was essential to securing institutional business. While there are changes going on, you have to have the structure in place .*.*. otherwise people are not going to take a look at all," said Michael Jones, Boston Partner's marketing chief.
Boston Partners benefited from having extensive infrastructure and staff in place from day one, said Mr. Jones. The firm opened with 33 former BCAM staffers who were all partners in the new firm (P&I, Jan. 8).
Another top gainer was BlackRock Financial Management, New York, which closed its acquisition by Philadelphia's PNC Bank Corp. last February. BlackRock was third in total gains in the $1 billion to $10 billion category, with $2.2 billion in net new business, which also made it the top gainer in domestic fixed income.
Despite the continuing efforts of defined contribution plan sponsors to shift from guaranteed investment contracts, GIC portfolio managers still had a great year. The top five reaped nearly $6.9 billion in assets, compared with $4.7 billion in 1995 and $4.5 billion in 1994. Fidelity Investments was the top GIC portfolio manager, with $2.5 billion. It was followed by American Express Institutional Services, Minneapolis, with $1.7 billion; INVESCO North America, Atlanta, with $1.4 billion; Pacific Investment Management Co., Newport Beach, Calif., with $740 million; and State Street Global at $527 million.
Some perennial gainers in the list were absent this year, including Bankers Trust Co., New York, which recently went through a restructuring aimed at curbing the flight of assets (P&I, Oct. 30). Among managers over $10 billion, Bankers Trust ranked ninth in new international/global gains with $616 million, but didn't make the top 10 for the other categories.
A new entrant among managers with more than $10 billion was currency overlay specialist Pareto Partners, New York. Pareto broke the $10 billion mark in 1995 and ranked No. 10 in new business with a gain of $3.8 billion. Pareto Partners was the top gainer in 1994 for the $1 billion to $10 billion category with $3.5 billion in new business.