FRANKFURT - Allianz Dresdner Asset Management is planning to sell Cadence Capital Management in Boston as soon as valuations for money managers increase.
Joachim Faber, chief executive of Frankfurt-based manager, confirmed the plans, but stressed the unit would not be sold until valuations improved.
He described the Cadence holding, part of Allianz's 1999 acquisition of 70% of Pacific Investment Management Co., Newport Beach, Calif., as "not strategic." (Allianz acquired Dresdner Bank and its money management units in 2001.)
"It has more of a growth style, and we simply have other offerings in that category," Mr. Faber said. Allianz's big U.S. equity shop, Dresdner RCM Global Investors, is a growth manager, he noted. Cadence, with about $6 billion under management, "doesn't fit into our global equity platform," he said.
He categorically denied some reports that Allianz AG planned to float Allianz Dresdner Asset Management as a separate entity. "Allianz is not going to sell any of its strategic asset management holdings," he said.
Parties that might be interested in buying Cadence include BNP Paribas SA, Paris, whose money management unit came close to purchasing a stake in Grantham, Mayo, van Otterloo & Co., Boston, earlier this year. Gilles Glicenstein, managing director of BNP Paribas' money management arm, declined to comment.
In another development, Marna Whittington, ADAM's chief operating officer and president of Nicholas-Applegate Capital Management, San Diego, confirmed Allianz's plans to buy the remaining 30% of the shares in PIMCO from Pacific Life Insurance Co. Ms. Whittington said the firm has been a great buy for Allianz.
Mr. Faber deliberately has chosen not to integrate Allianz Dresdner's money management firms. "We've kept intact all our investment processes, we don't want to compromise the quality of our performance. We have made only minor changes. But we have had a chance to take out quite a lot of cost from the combined units," he said, referring to the decisions to integrate Dresdner's bonds teams with PIMCO, and to set up one company for each region to supply all administration and support services.
Mr. Faber also acknowledged he's concerned about client defections at Oppenheimer Capital, New York, and Nicholas-Applegate: "It is always a concern that they are losing mandates, but we are winning mandates too."
With the exception of Oppenheimer, ADAM's problems in the United States are largely due to styles being out of favor. Both Nicholas-Applegate and Dresdner RCM are losing clients as pension funds move from growth managers or even into bonds, according to one senior London consultant.
Nicholas-Applegate's assets under management have dropped 50%, to $21 billion, in the two years ended June 30, according to figures obtained from the London consulting source.
Most clients leaving are citing the firm's aggressive growth bias as reasons, including the $4 billion Sacramento County (Calif.) Employees' Retirement System, which terminated Nicholas-Applegate from a $50 million U.S. small cap domestic equities portfolio.
Several pension clients have placed the firm on watch since October, when the company announced 17 of the firm's 76 investment professionals would be leaving the firm and several pooled funds were closed.
Dan Holmes, a managing director with Summit Strategies Group, St. Louis, consultant to the $371 million Knoxville (Tenn.) City Employees' Retirement System, said he has compiled a shortlist of possible replacements for Nicholas-Applegate, which runs a $25 million active domestic growth portfolio for the plan.
At Oppenheimer, where performance plummeted this year with investments in WorldCom Inc., clients are leaving its flagship large-cap value fund, analysts said.
Geoff Mullen, managing director of institutional business at Oppenheimer, confirmed Oppenheimer is suffering a net outflow of assets, but wouldn't give an amount. In the first three quarters of 2002, Oppenheimer lost $600 million worth of mandates, according to one source.
The net outflow comes from clients "acting on our short-term underperformance. That performance can be attributed to some individual investments, namely WorldCom, and our belief that the economy would pick up," Mr. Mullen said. Oppenheimer was the third-biggest shareholder in WorldCom.
The firm has lost some clients, including the $1.4 billion Chicago Laborers & Retirement Board Employees' Annuity and Benefit Fund, which recently terminated Oppenheimer from its $60 million active large-cap domestic equities account. Other losses included a $50 million active value large-cap equities account from the $1.25 billion Oklahoma Firefighters' Pension and Retirement System, Oklahoma City, and a $10 million loss in the same style from the $77 million Wichita State University Foundation, Wichita, Kan. All cited the performance of the firm's large-cap value strategy as the reason.
The firm's flagship Intrinsic Value Fund has returned -33.4% in the first three quarters of 2002, while the Russell 1000 Value index, used as a benchmark, returned -22.7% over the same period, according to information on Oppenheimer's website.
Its other equity vehicles, including midcap and small-cap value funds, also are trailing their benchmarks.
Despite the problems of its U.S. operations, ADAM executives believe the firm is well placed to grow as a money manager and remain the core strategic concern of its parent.
"One thing that attracted me is the diversity of the business. All of the different units in ADAM complement each other and give good downside protection for different market cycles," said Andreas Utermann, the new global chief investment officer for equities.
When growth doesn't work, value should, Mr. Utermann said. And when equities are falling, bonds should be rising, he added.
The biggest and most successful hedge to date has been PIMCO, which Allianz purchased in July 2000. PIMCO has gained $78 billion in the first nine months of 2002,according to spokesman James Clarke, including $7 billion from European and more than $10 billion from Asian clients.
And despite being out of style, Allianz's Dresdner RCM unit is picking up money in Europe too. In the last year, it has won big accounts from the Irish Pension Fund Reserve, the Norwegian Petroleum Fund and Sweden's state-sponsored AP funds.