Boston Co. Asset Management - crippled in 1995 by the departure of 35 staffers who formed rival Boston Partners Asset Management - is riding the comeback trail hard.
1996 was a year of rebuilding for BCAM, said Francis Antin, vice chairman and chief operating officer. The firm made changes designed to strengthen performance and keep its investment process intact in the wake of the client defections that followed the Boston Partners departures.
BCAM has added staff and plans to continue developing portfolio management talent from among its analysts to maintain continuity in the process, said Alexander "Toby" Webb III, vice chairman and chief investment officer. BCAM hired five equity analysts and four sales people in 1996 and plans to add an additional equity analyst and another sales person on the West Coast this year.
The firm also is creating strategies and using expertise already available in-house to launch others, said Mr. Webb. For example, it is launching a structured equity product with a quantitative style that uses the input of all of the firm's analysts, and last year it launched an emerging market equity product and a midcapitalization domestic equity product after closing its small-cap strategy at $750 million.
BCAM plans to continue to target defined benefit plans in 1997, said Mr. Antin, but he added the firm also plans to increase its penetration in the defined contribution market and wants to take its strategies into different markets such as life insurance and non-U.S. accounts.
BCAM will leverage parent Mellon Bank Corp.'s presence in non-U.S. markets, but plans to establish relationships with non-U.S. firms on its own, said Mr. Antin. Additionally, sister company Dreyfus Corp. might be helpful in penetrating the defined contribution market; there are several Dreyfus offerings among the 18 mutual funds BCAM subadvises.
BCAM lost $11 billion in assets during the quarter following Boston Partners' opening in April 1995 or about 42% of its assets under management; at least $5 billion of BCAM's asset base followed the Boston Partners team, and other clients chose to move assets in-house, to index funds or to other managers. From a high of $26 billion the month the Boston Partners team left, BCAM dropped to a low of $12 billion by the end of 1995.
During that period, Mellon Bank hired Mr. Webb, formerly president and chief investment officer of Fidelity Management and Trust Co., and Mr. Antin, a former director of marketing and product development at State Street Bank & Trust Co. The asset losses eventually subsided, and by year-end 1995, BCAM had begun gaining business again (Pensions & Investments, Jan. 8, 1996).
With the situation stabilized, BCAM had to get back into the marketplace and raise assets, said Mr. Antin. In 1996, the firm brought in 49 new clients and ended the year with $17 billion in assets, of which $1.3 billion came from the new clients and $3.7 billion from market appreciation and additional assets from existing clients. Among new clients was TRW Investment Management, which hired the firm to manage $175 million in assets in its balanced, small-cap and premier value equity portfolios; San Bernardino County (Calif.) Employees' Retirement Association, which hired it for a $70 million small-cap account, and the University of Pittsburgh endowment, which selected BCAM for a $40 million equity account.
"We gained back a lot of confidence that this firm was for real," said Mr. Antin.
BCAM spent a lot of time with consultants in 1996, which paid off, he said, noting 80% of the searches the firm participated in during the year were consultant-driven. BCAM managed to win 60% of the searches it participated in and some clients who had left in 1995 returned to the fold, including the Longshoremen ILA Savannah (Georgia) and the University of Pittsburgh, said Mr. Antin. BCAM won two searches in the first two weeks of January and was participating in finals for seven other searches, said Mr. Webb.
Because the Boston Partners team was made up almost entirely of equity professionals, BCAM's results in equity investing were "the real question mark the marketplace had for us," said Mr. Webb. The firm managed to deliver performance and maintain the same investment process, he said, noting all equity strategies beat their benchmarks for the year.
BCAM's core equity composite returned 23.44% for 1996, dynamic equity returned 29.64% and concentrated value equity returned 26.95%. By comparison, the Standard & Poor's 500 index returned 22.96% and the Russell 1000 value index returned 21.64% for the same period. BCAM's midcap product, the premier value equity portfolio, returned 34.06% for the year and its small-cap equity portfolio returned 36%, compared with the S&P Midcap index's return of 19.2% and the Russell 2000 index's 16.51%
Among international portfolios, BCAM's international equity strategy returned 12.03% for the year and its emerging market strategy returned 21.66%, compared with a 6.05% return for the Morgan Stanley Capital International Europe Australasia and Far East Index and a 6.04% return for the MSCI Emerging Markets Index (gross of fees).
"We've re-established the reputation of our products here in the U.S.," said Mr. Webb.
