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you help them solve their portfolio problems and you become more than just a money manager to them.
MR. SCHWARTZ: The successful firms that I have seen are the firms that are committed to doing this for the benefit of their client through their given tools. I've seen probably now over 1,000 searches in terms of the finals, and the thing that singly stands out in my mind are the people that can't wait to get into the office in the morning. You have to drag them away in the evening. I always think of the firms that you will call at 7: 00 or 8: 00 at night where it might be 9: 00 or 10: 00 their time, and someone is there. Typically it's the CIO.
That's what I seek when I do the work that I do in terms of manager research.
P&I: Are there opportunities for U.S. investment management firms outside of the U.S.?
MR. HEALEY: The growth we see is in Europe and Japan, just in terms of dollars. There's also a major change occurring in the U.K. as they change to a more ERISA-like regime. There is growth of assets in Holland, followed by Switzerland; the starting concerns in Germany about whether they should pre-fund what has traditionally been just balance sheet funding of pension liabilities. There are noises at least in France and Italy as they worry about the underfunding of their aging population.
MS. DEBATIN: Continental Europe, we often say, is where we were 25 years ago in terms of investment management business. I would suggest that in some of continental Europe, I exclude the U.K., they're still back to where the banks and the insurance companies are managing the money and have had control of the assets. I was in Paris and I was talking to the office of a large U.S. investment management firm, and I said to the individual there, you know, you've done a great job. You've done all of us a service because over the last three years you have advertised your performance vs. the bank's every month in the newspaper, and you have begun to raise the awareness of relative performance, which these individuals hadn't thought about before.
Without doubt, the more quantitative strategies have taken hold in the U.K. because there you didn't have good process and it didn't really matter for a long time. Now it has more meaning. Some of the firms that have put in some of the quantitative processes have done very well.
Clearly in Latin America the defined contribution plans are all kicking in and will be building assets over the next few years. I would expect to see that expand across Latin America.
P&I: On opportunities for U.S. investment organizations outside the U.S.: Are they worth pursuing? What kinds of firms?
MR. RITTENOUR: I think the major opportunities there are for the megafirms.
MR. PEYTON: I think the major opportunities outside the U.S. for medium-sized firms is managing non-U.S. assets for American investors because they need to do that to understand the dynamics of a global economy and a global investment world, and managing foreign assets will help them in managing their domestic assets.
If you have special expertise in value management or growth management, why not be a global growth manager or a global value manager for U.S. investors? I think that's really where the opportunities are, as opposed to somehow finding a distribution channel overseas. Although, that's not impossible. We certainly know of a number of firms who are growing quite rapidly with foreign clients, but they are the firms that have the distribution channels already in place and the locations, which is a very expensive proposition.
MS. DEBATIN: It's expensive and it's not a high fee.
MR. SCHWARTZ: No one has addressed the opportunities still here on this continent, which include Canada. Some of the legislative changes from the pension plan perspective that have occurred up there are affording opportunity in greater investment assets outside of the Canadian exchanges.
In addition to that, it's been my experience in working with a number of clients that for those investment management organizations that do have offices in Canada, tapping into a distribution network that is already in place through a number of Canadian entities has proved most profitable for them in terms of acquiring either the direct management or, through some subadvisory, private-label mutual fund assets for the Canadian market.
P&I: If you were the CEO of a large firm, $15 billion firm or above, what would you do to ensure its continued growth?
MR. RITTENOUR: I think the best window to that is to see what a lot of the successful CEOs have done in recent years. They are obviously a lot closer to the businesses than we are - firms like Rosenberg, Miller Anderson, Brinson Partners and INVESCO. They obviously see technology, a need for increased capital to provide worldwide globalized services, networks of foreign partners, and many of these firms have tried other approaches. RCM is a good example. They had an interim type of thing. It wasn't working right, so they sought a better partner. I think you're going to continue to see the same type of thing with the firms that are still left that are large. There will be a continued consolidation.
P&I: Do you see more of these large firms setting up separate client retention groups vs. client gathering groups?
MR. EAGER: Yes.
MR. RITTENOUR: I'll give you a good example of that: Sanford Bernstein.
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