NEW YORK - Despite ferocious market conditions, assets under management at Bear Stearns Asset Management Inc., New York, rose as fast as gas prices last year.
The high-octane growth brought assets under management up 40% to $18 billion. Among the highlights:
* The 5-year-old Bear Stearns mutual fund family grew more than 100% in 2000, ending the year at more than $4 billion. Assets in the mutual fund family stood at just $179 million at year-end 1996.
* The topsy-turvy market favored Bear Stearns' large-cap deep value strategy, with a composite return of 17.5% (gross of fees) as of Nov. 30, compared with -9.6% for the Standard & Poor's 500 stock index.
* New institutional clients in 2000 numbered 33, among them Citigroup, Detroit General Retirement System, General Electric Co., General Motors Corp., Long Island Rail Road, New York University, Pepperdine University, Qualcomm, World Wrestling Federation and the Bakery & Confectionery Union & Industry International Pension Fund.
* Expansion of the investment strategies offered to Japanese clients persuaded NTT Data Corp., Nippon Life Insurance and TransCosmos USA, to hire Bear Stearns.
* The company's 2-year-old wrap program, STRATIS, has attracted $800 million so far.
* Successful cross-selling between the asset management and investment banking groups led to inflows of more than $1.3 billion in corporate cash from clients such as Lee Enterprises, Cypress Semiconductor Corp. and Data Return Corp.
* Alternative investment strategies were expanded with the launch of a fourth private equity fund of funds; that business line now totals $600 million. Two new venture capital funds opened in 2000 - Bear Stearns Health Innoventures LP and Lynx New Media Ventures LP (a joint venture with The Virgin Group). The Constellation Ventures II Fund raised $350 million last year.
* Bear Stearns' hedge fund family grew to six with the introduction of a new asset-backed securities hedge fund, ASB Partners. Overall, hedge fund assets topped $1 billion in 2000 and all outperformed their benchmarks.
* Overall, staff increased 37%, with 50 new portfolio management, marketing, client services, operations and administrative professionals. Steven Buckridge joined as chief development officer and Robert Irwin joined as chief operating officer of the information technology group.
The Fordyce effect
The spectacular growth is due in large part to Doni L. Fordyce, president, chief executive officer and senior managing director, who joined Bear Stearns as head of institutional marketing in 1996, became chief operating officer in 1997 and CEO at the beginning of 1999.
Ms. Fordyce spent a decade at Goldman Sachs Asset Management, New York, starting in the structured bond portfolio group. She went on to help Goldman Sachs enter the asset management business in 1988 and then headed institutional client services and product development.
Bear Stearns was known more for investment banking than money management when Ms. Fordyce took over. As of Dec. 31, 1996, assets under management were $8.2 billion, of which $7.3 billion was from U.S. tax-exempt institutional investors.
Ms. Fordyce said her mandate was to grow Bear Stearns Asset Management "organically: no liftouts, no acquisitions. We focused on building the business from the ground up with a focus on institutional, retail and high-net-worth businesses."
When she came into the company, Bear Stearns' $8 billion in assets mainly were in core fixed income and value equities. "It was obvious that we needed to work on building up the equity teams, diversifying by style. We also needed to focus on high-fee products," said Ms. Fordyce.
It also was obvious, she said, that Bear Stearns, which was primarily an institutional money manager, needed to attract more high-net-worth and retail assets, while preserving its institutional base.
One of the first things Ms. Fordyce did was to organize institutional marketing teams by client type to serve endowment and foundation, corporate and public clients.
Consultants also were a primary focus. Persuading them of the stability of Bear Stearns' team paid off in 2000 when many plan sponsors looked to move back into value strategies or to find deeper value managers.
"We've been in a ton of searches lately, partly because we're now on Callan's preferred list. Consultants have been worried by M&A activity at other companies, by teams falling apart, by the competition falling apart, by managers that have not stayed true to their value style discipline. We've been convincing consultants to give us some time and it has paid off," Ms. Fordyce said.
She and her team have also focused on building capacity and adding new investment styles.
The company's primary growth investment vehicle so far is the Bear Stearns S&P Stars mutual fund, which uses a growth-at-a-reasonable-price strategy.
The traditional growth investment strategy was successful, even last year, with a 19.8% return year-to-date as of Sept. 30, 21 percentage points ahead of the S&P 500 for the same period. It attracted $2 billion in net inflows in 2000, finishing the year at $2.6 billion.
Bear Stearns is capitalizing on the success of the GARP strategy and just began to offer it in separate account format for institutional investors.
Bear Stearns concentrated its greatest energies over the last three years in the area of alternative investments as part of its bid for more market penetration into the high-net-worth marketplace and by way of creating high-fee-generating strategies.
The successes of the hedge fund, venture capital and private equity strategies are due partly to participation by institutional investors, but most of the assets are flowing in from wealthy individuals, said Ms. Fordyce. A new bank loan fund was due to close in the first quarter at $400 million.
With inflows of $1 billion per month, Ms. Fordyce has perhaps exceeded even her own mandate to grow Bear Stearns into the middle tier of money management firms. She turned aside suggestions that Bear Stearns is ripe for acquisition by a far larger company. She didn't deny the possibility of a sale, but downplayed its likelihood.
"I'm managing people who love their jobs, who are completely passionate about them. Even if we were for sale, this won't change," Ms. Fordyce said.