Despite bruising markets that depressed the overall number of money manager searches, a number of investment companies scored high net new sales in 2001.
In fact, some large companies, especially those with a growth bias, are doing far better with business from institutional clients than they are overall.
Capital Guardian Trust Co., Los Angeles, had a net gain of $5 billion in institutional assets for the year ended Dec. 31 despite a 4.4% drop in total assets to $119.5 billion. It won 105 new institutional mandates last year and lost 27. Capital Research & Management Co., Los Angeles, a sister company that manages the American Funds, had an increase in total assets of 1.4% to $367 billion, a strong performance given the growth bias of the fund family. Defined contribution plan assets in CRMC's funds increased 5.5% to $83.1 billion, said Chuck Freadhoff, a spokesman.
Growth manager MFS Investment Management Inc., Boston, had a 6.5% drop in total assets to $137.5 billion. Institutional net sales were $5.5 billion, and total net sales were $17.2 billion from 55 new accounts. Total institutional assets were $30.6 billion. Spokesman David Olivieri said U.S. growth and value contributed most to institutional increases.
GE Asset Management, Stamford, Conn., had a drop in total assets of 4.3% to $112.5 billion but gained net new business from institutional investors of $7.9 billion, said Tim Benedict, a GE spokesman. GE Asset Management managed about $40 billion for external clients as of Dec. 31, in addition to $45.2 billion managed for the GE Pension Trust and $31.7 billion for the GE 401(k) plan.
Alliance Capital Management Holding, New York, increased total assets as of Dec. 31 a mere 0.4% to $455.4 billion, compared with $453.7 billion at year-end 2000, hurt as it was by market depreciation on its growth side. However, net institutional wins totaled $24.3 billion, bringing total institutional assets to $258.6 billion. Total net growth was $34.9 billion.
Huge growth rewarded some of the smallest or newest entrants to the institutional business last year, fueled by very strong institutional sales.
Arrowstreet Capital LP, Cambridge, Mass., had a 398.5% increase in total assets to $1.7 billion as of Dec. 31, compared with $341.3 million the year before. Net new institutional business won in 2001 was $1.4 billion. The firm's first hedge fund, the Arrowstreet Global Opportunities Offshore Fund, attracted $20 million after it opened in the fourth quarter, and another $50 million mandate to the long-short fund was funded Jan. 1.
Six-year old Artisan Partners LP, Milwaukee, racked up a 60% increase in assets to $16 billion as of Dec. 31 in its high-alpha equity strategies. Institutional assets un-der management were $10.8 billion, and net new business overall was $5.2 billion. Four of six small-cap and midcap investment strategies are closed or near closing, said Andrew Ziegler, managing partner and chief executive officer.
Fixed-income specialist Metro-politan West Asset Management LP, Los Angeles, celebrated its fifth birthday last year with a 45.3% increase in assets to $17 billion as of Dec. 31. Institutional assets totaled $16 billion, and new institutional gains were $4.5 billion. S. Chris Scibelli, director of marketing, said MetWest takes a more bottom-up approach to bond selection, and plan sponsors have been adding the firm to a lineup of more sector-oriented, larger bond managers to diversify their total bond holdings.
Harris Investment Management Inc., Chicago, gained 72% in total assets to end 2001 with $20.8 billion in total assets, up from $12.1 billion the year before. Institutional asset gains were $3.3 billion. Prospects for 2002 look great: A whopping $500 million in assets was won in the first six weeks of the year.
Several longer-established active equity managers, both growth and value, attracted strong net sales in 2001.
San Francisco's Dodge & Cox saw its total assets grow 18.6% in 2001 to $57.5 billion. Net separate account sales were $1.7 billion, bringing total institutional assets to $35.4 billion. Institutional assets invested in its mutual funds are not included in the net growth figure. Sticking to a streamlined investment lineup - only one style is offered in U.S. equities, international equities and U.S. fixed-income - helps the firm stay focused, said Ken Olivier, a spokesman.
Goldman Sachs Asset Management Co., New York, had $305.7 billion in assets as of Dec. 31, an 18.5% increase from the previous year, said Gary Black, a managing director who runs the institutional and retail business at GSAM. Institutional assets were $226 billion as of Dec. 31, and net new institutional business was $3.1 billion. Private equity and global fixed income contributed to the growth, and more business was gained from non-U.S. clients, the fruits of several years of focusing on the European and Asian markets, Mr. Black said. Total net new business gained by GSAM in 2001 was $7.6 billion.
Mellon Bank, Pittsburgh, had $592 billion on Dec. 31 across all money management subsidiaries, an increase of 11.7% from the previous year. The firm gained net new institutional assets of $4.4 billion; total institutional assets were $349 billion (excluding Dreyfus Funds). Total net new sales came in at $51.2 billion for the year. Most growth came from sales of U.S. value, international and emerging markets equity mandates managed by the Boston Co. subsidiary, cash and short-duration bond funds from Mellon Bond Associates and currency overlay strategies managed by Pareto Partners and Mellon Capital Management, said Greg Stein, a spokesman.
UBS Asset Management Americas, Chicago, came back with a bang in 2001 from "a tough environment at the end of 1999. We've had our second-best performance year in history (the best was in 2000)," said Benjamin J. Lenhart, chairman and chief executive officer. Of the composite returns of 21 core strategies, 16 beat their respective benchmarks. Total assets increased 26.2% to $405 billion as of Dec. 31, $198 billion of which came from institutional investors. Net growth of institutional assets was $4 billion, and total net new assets were $21 billion last year. Part of the new growth came from institutional hires for core bonds and short-duration bond strategies, as well as global and U.S. core equities.
Despite an industrywide trend to active management in response to poor equity markets, three big passive managers and several quantitative managers enjoyed strong sales.
State Street Global Advisors, Boston, had an 8.4% increase in assets to $785 billion. Net new institutional assets were $43 billion, and total net new growth from all sources was $45 billion, said Chris Pope, senior principal. Between 60% and 65% of new sales were from existing clients for new SSgA products, said Mr. Pope. A big marketing push outside the United States attracted clients for passive and enhanced indexed strategies. Last year the firm added 12 institutional clients with $12 billion under management to its total plan outsourcing service, said Mr. Pope.
Northern Trust Global Investors, Chicago, also had a terrific year in its outsourcing unit, attracting $1 billion from eight clients, said Kevin Rochford, managing director-global sales and client servicing. NTGI's total assets dropped 2.4% to $330 billion; of that, $236.1 billion came from institutional clients. Institutional net new growth was $24.6 billion, Mr. Rochford said. Much of that new money was destined for NTGI's quantitative and indexed strategies, but more institutional money than ever - $2 billion - was directed to NTGI's active large cap growth and value domestic equities. International equity strategies and alternative investments, especially hedge fund-of-funds, also did very well.
"Market-driven volatility drives people into more risk-controlled and diversified strategies," said Kathleen Taylor, managing director-institutional, at Barclays Global Investors, San Francisco. Passive and quantitative strategies, both equity and fixed income, remain popular with institutional investors in rough markets. While total assets dropped 4.2% to $769 billion, net institutional asset growth was $49.4 billion last year, including iShares of its mutual funds.
Quantitative manager Franklin Portfolio Associates Inc., Boston, a Mellon Bank subsidiary, posted a 9.5% drop in assets to $16.8 billion, but it had net institutional sales of $4.6 billion, said John S. Cone, president and chief executive officer. Franklin Portfolio Associates is receiving a lot of business through its parent company, especially from international clients, Mr. Cone said.