Defined contribution plan growth worldwide is the driving force behind the Scudder, Stevens & Clark-Zurich Kemper Investments merger, and the proposed J. P. Morgan-American Century Cos. alliance.
Both deals are designed to strengthen the firms' competitive positions as the U.S. defined contribution market becomes more competitive, and other countries adopt such plans.
The deals also would produce two huge organizations.
Analysts say the Scudder Kemper merger could catapult the U.S. firm into strategic prominence.
A partnership betwen J.P. Morgan Co., New York, and American Century Cos., Kansas City, Mo., would provide Morgan with the defined contribution capability it seeks, sources say.
The newly created Scudder Kemper Investments Inc. would have $200 billion under management - including at least $50 billion in defined benefit assets - when the merger between Scudder, Stevens & Clark Inc., New York, and Zurich Kemper Investments Inc., Chicago, is completed later this year.
The new entity would rank sixth in Pensions & Investments' list of the largest U.S. money managers. Worldwide, Scudder Kemper would be No. 23.
Both parties in the merger gain significant mass in several areas.
Chas Burkhart, president of Investment Counseling Inc., West Conshohocken, Pa., said it's "hard for a firm like Scudder to find a serious partner like Zurich that doesn't want to control them, that will give them a lot of room, but help craft the business.
"What's important is two or three years out: Have they made their clients and shareowners happy?"
A Zurich Group statement said it brings risk management expertise as well as investment management knowledge to the deal. Zurich Group Chief Executive Officer Rolf Hueppi said Scudder offers the ability to perform global investment management.
Zurich spokesmen said it is unclear how the deal will affect the 43-person Zurich Investment Management group in London, which manages $25 billion.
Scudder Kemper will have headquarters in New York; the $860 million transaction is expected to close in the fourth quarter.
The parent company of Zurich Kemper is the Zurich Group, a 100-year-old Swiss insurance and financial services organization based in Zurich.
Scudder spokeswoman Eleanor Mascheroni said the company is aware of political concerns about the involvement of prominent Swiss businesses in the Nazi accumulation of wealth during World War II, and allegations that Swiss companies continue to hold the victims' assets.
"We raised the subject with Zurich and were satisfied with their review of this matter," Ms. Mascheroni said.
Numerous large public pension funds have voiced concern about the Nazi gold issue, including the $70 billion New York City Retirement Systems. New York City has international equities with Scudder, although the amount could not be learned.
In May, New York City Comptroller Alan Hevesi traveled to Switzerland and met with leaders from several Swiss institutions about war-related dormant bank accounts.
Mr. Hevesi, a trustee of the city pension funds, later said he would meet with institutional investors, state and local treasurers and comptollers and public pension fund trustees to develop a common response.
If J.P. Morgan is able to acquire 45% of American Century Cos. - the companies are in discussions - and the total assets of the two companies are pooled, their combined assets would total $280 billion, according to the companies. That could put J.P. Morgan/American Century in the No. 5 spot for U.S. managers and 10th worldwide.
American Century has $58 billion in total assets, of which $20 billion is defined contribution. J.P. Morgan Investment Management Inc. manages $222 billion in total assets, of which only about $8 billion is defined contribution.
J.P. Morgan is known to be seeking an inroad to the defined contribution market; American Century would supply that through its record-keeping and other systems. For American Century, an alliance with Morgan would provide wider distribution options, access to J.P. Morgan's blue-chip clients and the ability to offer Morgan's funds alongside its own, according to industry sources who declined to be named.
The companies would continue to operate separately, although analysts believe J.P. Morgan wants to increase its stake, and would prefer to own the entire company.
American Century spokesman Chris Doyle said the company is in discussions with J.P. Morgan but no agreement is signed, nor is there a guarantee the companies will come to an agreement. If there is a transaction, it probably would be the purchase of a minority, non-controlling interest, Mr. Doyle said.
J.P. Morgan spokesman Joe Evangelisti said the company would not confirm or deny it was in discussions with American Century.