NEW YORK -- The plans of Alliance CEO Bruce Calvert to expand the firm's value equity business were under way even before value stocks rebounded last month.
Value equity comprises 5%, or $6.7 billion, of the $166.8 billion in total equity assets managed worldwide by Alliance Capital Management LP, New York.
Company marketers are now pushing Alliance's disciplined value style, visiting consultants and participating in new searches.
Alliance was the 11th largest U.S. institutional money management firm at year's end, with $113 billion in U.S. institutional tax-exempt assets under management. It is majority-owned by Equitable Cos. Inc., which is 58% owned by AXA SA, a Paris-based insurance company.
Mr. Calvert took over as chief executive officer in January, replacing Dave Williams, who selected Mr. Calvert to succeed him. Although Mr. Williams has retired as CEO, he continues full-time as chairman and honorary leader of Alliance's tight executive inner circle.
Mr. Calvert would like to see Alliance move into alternative investment areas other than hedge funds. The firm intends to be a bigger player in the 401(k) market as well.
"I'm also optimistic about our mezzanine finance business through Albion. And if I can dream, we can do more in the private equity, private debt arena," Mr. Calvert said. (Albion Alliance LLC, New York, is a 2-year-old joint venture between Alliance and Albion Asset Advisors LLC, New York.)
Mr. Calvert's ability to think broadly and act aggressively helped propel him to the top leadership position at Alliance, Mr. Williams said.
"Bruce has played a role as a problem fixer over the last 20 years," Mr. Williams said.
That can be an uncomfortable position for some executives, but it's the kind of challenge fit for Mr. Calvert, a competitive sportsman.
While Mr. Williams was known to run the firm with a kind hand, Mr. Calvert is known to be more demanding, using a different management style. Mr. Calvert said of Mr. Williams, "He is the more quiet, patient and thoughtful one."
Considering the road ahead of him, Mr. Calvert said, "This is not a time for urgent change. I don't intend to rush off in a new direction. Dave is still here, so I have the luxury of easing into things."
The transition comes at a prosperous time for Alliance. Total assets under management grew 22% during the 12 months ended March 31, topping $300 billion. Net income was up 42% for the first quarter, compared with the same period last year, and the firm's pre-tax profit margin came in at 35.4%, compared with 32.9% a year ago.
And although the company lost $1.2 billion in separately managed accounts -- predominantly tax-exempt clients --because of terminations or redemptions in the first quarter, it won $1.7 billion in new business, according to the quarterly report. The firm for the quarter had net new business of $500 million.
The firm's current strength can be attributed in part to the reorganization headed by Mr. Calvert, Mr. Williams said.
"He reorganized our active equity operation in the 1980s, creating different teams of portfolio managers that used a similar process or managed similar types of securities," Mr. Williams explained.
"And when we had performance problems in the fixed-income area in the 1990s, he took over the operation temporarily -- although he had no previous experience in fixed income and reorganized it using the team approach . . . It was a two- or three-year assignment that really put us on the right track.
"Our success in the institutional business is the result of the reorganization of the equity business in the 1980s and the fixed-income business in the 1990s, and I'll bet changes in the international business will pay off three or four years from now," Mr. Williams said.
Mr. Calvert said he is optimistic about potential for asset management business growth in Japan. "That's one of our biggest opportunities. We'll do well in the pension fund business there because we have a Japanese equity product they want. We have a good local team there with marketing and administration, and Japanese portfolio managers," he said.
A sore spot
Mr. Calvert spent most of 1998 at Alliance's London office, both repairing and reorganizing for the future. London has been a sore spot for Alliance in recent years. The most prominent matter was the blowup of the former Cursitor-Eaton Asset Management Co. shortly after its acquisition by Alliance.
Mr. Williams takes responsibility for the "unlucky" purchase of Cursitor. Formerly a firm with stellar performance, after the acquisition Cursitor experienced performance problems and client defections that continued throughout 1998.
"Bruce was involved in the decision to acquire it, yes, but I was CEO at the time and I was the driving force on acquiring Cursitor. The judgment there was wrong, and it was my judgment," Mr. Williams said. "After we had severe problems there, Bruce helped reorganize."
The asset allocation firm only had $1.7 billion under management at year's end, compared with $8.4 billion on Dec. 31, 1996. On Dec. 22, Alliance paid $10.2 million to buy Whittingdale Holdings Ltd., London, with $1.5 billion in assets under management.
Rising through the ranks
Rising to the top of one of the nation's largest investment management firms is quite a deal for a native of Homewood, Ill., who majored in philosophy and religion in college; has no advanced degrees; and began his career casually in the research department at Northern Trust Co.
His father was a certified public accountant and his mother was a first-grade teacher.
Shortly after graduating from Colgate University in 1968, he was hired in the research department at Northern Trust in Chicago.
"The guy that hired me left three weeks later and they didn't know what to do with me," Mr. Calvert recalled. He was transferred to the personal trust portfolio management division, a fortuitous twist of fate that gave him his first taste of the asset management business.
But the military draft for the Vietnam War was pressing, so Mr. Calvert joined the U.S. Marine Corps in late 1969 and spent a year stateside in Virginia.
He returned to Northern Trust, but was looking for something elsewhere. He interviewed at Donaldson, Lufkin & Jenrette Inc. in Chicago, the firm that then owned Alliance, for an institutional sales position. They offered him the job; he turned it down.
Later, Mr. Calvert recalls, the DLJ representative sought him out with a portfolio management and marketing position, which he accepted.
Mr. Calvert joined the Chicago office in 1973; nine years later, he was running that operation.
In 1986 he became an executive vice president in New York and was appointed director of equity research for the company. Five years later, he assumed oversight for Alliance's fixed-income activities.
As in the years he has played rugby, Mr. Calvert kept the ball rolling. He was elected to the firm's board of directors in 1992 and became chief investment officer a year later.