BOSTON -- Colonial Advisory Services Inc. made its move into the institutional marketplace this month by managing the assets underlying a $500 million collateralized bond obligation.
Colonial will manage the $500 million in fixed-rate, high-yield securities and emerging market debt backing several series of notes bought by about 10 institutional investors, including several pension funds.
Colonial Advisory is the institutional arm of The Colonial Group Inc., a Boston-based mutual fund company.
Excluding the CBO money, Colonial Advisory manages $140 million in insurance and bank assets, the majority of which is high-yield debt. None of the money is pension fund assets.
"Our (performance) track record is so strong that consultants have been calling us for pension fund searches," said Helen Frame Peters, president and chief executive officer of Colonial Advisory.
"We would get into the final six because of our performance numbers, but we didn't currently have institutional money under management," Ms. Peters said. Without that experience, Colonial couldn't win the business from plan sponsors.
"But with this CBO, we want to signal to the market that we're serious about institutional," she said.
Lead underwriter for the CBO was Nationsbanc Montgomery Securities LLC, San Francisco.
Colonial Advisory has just hired Bruce George to head up institutional sales and marketing; Mr. George previously was a director of defined contribution investments at Putnam Investments, Boston.
Colonial will offer institutional investors high-yield fixed income and small-cap equity management. The same investment team now managing these investments for the mutual funds will be used for institutional accounts, Ms. Peters said.
Colonial Advisory was among the top 10 managers for one and five years in Pensions & Investments' Performance Evaluation Report in mid-year 1997 for overall managed fixed income and broad market managed fixed income.
The following performance results were reported for Colonial's bank and insurance accounts for the year 1997: Colonial's high-yield bond product was 15.07%, compared with 12.63% for the First Boston High Yield Bond Index; Colonial's small-cap equity returned 25.47%, compared to the Russell 2000 index return of 22.36%; and Colonial's strategic income strategy returned 9.96%, vs. 9.68% for the Lehman Aggregate Index.
Colonial is a wholly owned subsidiary of Boston-based Liberty Financial Cos. Liberty's other investment management companies are Stein Roe & Farnham, Liberty Asset Management Co., Keyport Life Insurance Co. and Newport Pacific Management. Liberty's total assets under management are about $52 billion.