Active institutional managers won twice as much domestic fixed-income business as equity in 1998, according to Pensions & Investments' Scoreboard report.
"It's the continuation of a trend we've seen in the last couple of years," said Bill Benz, managing director of Pacific Investment Management Co., which scored the most net new fixed-income business in 1998 -- both overall and for active management.
The top 10 active fixed-income managers won a combined $68 billion in net new domestic business, according to Scoreboard data. The top 10 active equity managers won a combined $32 billion total in net new domestic assets.
Answer to critics
Nearly $125 billion in net new assets was won by the top 10 managers with more than $10 billion in total managed assets, which was a decline from the $155.3 billion won by the top 10 in 1997. The 1998 survey list doesn't include three large firms that often dominate the Scoreboard charts: Barclays Global Investors, Fidelity Investments and Vanguard Group. BGI's net new business was not enough to make the top 10. Fidelity and Vanguard could not participate because they did not provide all of the data required.
For the Scoreboard ranking, managers reported institutional tax-exempt assets won from new clients or added by existing clients during the year; figures do not include assets gained by merger or acquisition, market appreciation, interest or dividends. Assets lost by a firm were subtracted from gross new business, resulting in the net dollar gain.
For the second year, State Street Global Advisors in Boston acquired the most net new institutional tax-exempt business for a firm with more than $10 billion under management.
Also mirroring the '97 report, the lion's share of SSgA's $31.8 billion in net new assets came from index accounts. SSgA reported $21.9 billion in net new indexed business in 1998, with the assets evenly divided between new and existing clients.
PIMCO of Newport Beach, Calif., had the second largest net dollar gain -- $18.3 billion -- of managers with more than $10 billion; PIMCO brought in $16.98 billion in overall domestic fixed income.
"We have benefited from the strong equity market," said PIMCO's Mr. Benz. "Clients have been rebalancing their portfolios, and gave us assets on the fixed-income side. Often clients will use fixed income to pay benefits or as a spending requirement.
"But it seems this year that instead of taking it out of fixed income, we saw clients taking it from somewhere else, either from equities or, given our strong relative performance, from other managers. In the end, it's fair to say we didn't have as large an outflow as we typically do."
PIMCO's net new business was predominantly from existing clients. In the previous survey, PIMCO was fourth of the top 10 managers in net dollar gain, with Barclays in second place and Fidelity, third.
The third top gainer for 1998 was J.P. Morgan Investment Management Inc. of New York, which scooped up 25% more net business last year, reporting $15.6 billion compared with $12.3 billion in 1997 and $5.4 billion in 1996.
"The three real drivers for us are U.S. equity, U.S. fixed and real estate," said Jeff Garrity, managing director and head of the institutional client business.
"We continued to expand our list of prospects, worked through consultants and through our regional offices. We have people covering the institutional market now on both coasts and a few years ago we didn't have that type of regional coverage."
J.P. Morgan also brought in $5.2 billion in net new real estate assets, the most for a manager with more than $10 billion under management. J.P. Morgan ranked second in the previous survey to Lend Lease Real Estate Investments. Lend Lease (formerly ERE Yarmouth) reported net real estate gains of $72 million in 1998, ranking third among the largest managers.
Morgan Stanley Dean Witter Investment Management made the top charts with a net dollar gain of $12.7 billion, and was second to PIMCO in winning the most active domestic fixed-income business.
"We gained across the board," said Frank Minard, managing director and head of global marketing for MSDW Investment Management.
"We've done relatively well in U.S. equities and had a good year in large-cap growth, midcap growth and midcap value. We've been hired for fixed income and have done a fair amount in mortgages and in active international."
Northern Trust No. 5
Northern Trust Global Investments won less net new business this year, although it again ranked fifth in net dollar gain. The Chicago-based manager gained $9.9 billion in 1998 but netted $12.8 billion in 1997. Northern had the most net new business passed to subadvisers, $4.2 billion.
Boston-based Putnam Investments nudged its way back into the Scoreboard top 10 with a net gain of $8.9 billion in new business. Putnam's $6.5 billion net gain in 1997 was too low to make the top 10, which cut off at $7.6 billion with Western Asset Management, Pasadena, Calif. This year, Western placed eighth in total asset gain and placed third in gaining net active domestic fixed-income assets.
Standish, Ayer & Wood Inc., Boston, was back on the top 10 chart again after a three-year absence. Standish brought in $6.7 billion in net new business among firms with more than $10 billion in total assets. The firm brought in $5.3 billion in net active domestic fixed-income business in 1998.
BlackRock Inc., New York, moved into the chart this year with a $5 billion net dollar gain overall. BlackRock netted $4.5 billion in domestic fixed-income business in 1998, all in active accounts.
A new group of firms fill the top 10 chart of managers with $1 billion to $10 billion in total assets; several of the firms that previously led the list, such as Boston Partners Asset Management LP, Allied Investment Advisors and Oaktree Capital Management LLC, have moved up into the tier of managers with more than $10 billion under management.
LSV Asset Management, a value equity firm in Chicago, now leads the pack with a net dollar gain of $2.1 billion for 1998.
Josef Lakonishok, LSV's chief executive and portfolio manager, said the company worked very hard to gain new business in 1998.