BIRMINGHAM, Mich. - Conventional wisdom says ownership by a bank is not a popular choice for institutional money managers, but Munder Capital Management has reasons to disagree. The money manager has been banking on its partnership with Comerica since the Detroit bank bought nearly half of the firm's equity in 1994.
Thanks to its relationship with Comerica, Munder Capital was able to enter the defined contribution market more successfully and develop a bigger presence in the mutual fund area than it would have done by itself, said Lee Munder, chief executive officer of the firm. The combined organizations have taken in about $8 billion in two years, to $38 billion in assets, and are making better inroads as a team, he said.
Before coming together, Munder Capital had $8 billion under management, mainly institutional separate accounts and three small mutual funds, while Comerica had $22 billion in assets and 15 mutual funds, with large proportions in fixed income and cash and a spotty performance record, said Mr. Munder. After the merger, Munder Capital absorbed the investment management staff of Comerica's Woodbridge Capital Management and World Asset Management and assumed subadvisory responsibility for the Comerica funds, which now are all sold under the Munder Funds banner.
When Comerica came calling, Munder Capital had been seeking a way to enter the 401(k) market, said Mr. Munder. It considered developing the capacity internally or through acquisition, but Comerica offered it a third choice, said Mr. Munder.
Munder Capital executives had realized defined contribution plans were a growth area, but the firm lacked the mutual fund vehicles to approach it. Comerica did not have as good a track record, but it had the capacity to do the record keeping and administration necessary to offer 401(k) products, which made it good choice for a partner, said Mr. Munder.
Today, Munder Capital manages $2 billion in defined contribution assets, and the combined mutual fund family has grown to 25 funds with $6 billion in total assets.
Munder Capital spent the last two years improving the performance of the Comerica investment vehicles to make them more attractive to investors, said Mr. Munder. At the same time, the firm doubled its staff to about 150 people. In the last year, Paul Tobias transferred from Comerica to become Munder Capital's chief operating officer, and Gerald Sizert joined the firm from Loomis, Sayles & Co. to become head of equities.
Munder Capital also broadened its product line by acquiring a 49% interest in Framlington Group PLC, an international equity and fixed-income manager in London.
The acquisition by Comerica had brought Munder Capital an international component through World Asset Management, a quantitative manager that offered international and emerging markets index funds, said Mr. Munder. But the firm needed an active international manager to fill the last gap, and building one was not a practical choice, he said.
The Framlington acquisition, which closed in November, was a good fit for Munder because the London firm uses the same growth at a reasonable price discipline on international investments that Munder Capital uses domestically, according to Mr. Munder.
On Jan. 1, Munder Capital launched three mutual funds using Framlington as subadviser: the Munder Framlington International fund, the Emerging Markets fund and the Healthcare fund. Munder plans to use the Framlington connection to market its strategies overseas but for now is focusing on U.S. clients. The firm brought Framlington marketer Peter Hicks to the United States to develop vehicles for the domestic market.
Munder isn't slowing down. Munder planned to launch a line of lifecycle funds in March and is considering a fixed-income fund investing in the new inflation-linked U.S. Treasury bonds.
Comerica has been a fairly hands-off partner, Mr. Munder said. Even while the bank owns almost half of the firm, Munder can operate as an independent money manager, including setting compensation and offering equity in the firm, he noted.
"They're the best partner I could ask for. They don't interfere," Mr. Munder said.