High-profile spinoffs, international equity firms and companies with big-name portfolio managers gained assets in 2002, even as most other investment shops lost ground.
"It was a flight to quality," said Susan McDermott, consultant at Stratford Advisory Group, Chicago.
The median money management firm lost 8% of its assets last year, according to eVestment Alliance, an Atlanta-based institutional research firm.
Spinoff boutiques such as Mellon Growth Advisors, Boston; Causeway Capital Management LLC, Los Angeles; and Arrowstreet Capital LP, Cambridge, Mass., were big winners in terms of assets gained. Each of these firms was established during the past three years, taking investment talent and an established process from their previous employers.
Because of size alone, large equity shops such as Fidelity Investments Inc., Boston, which lost 12% of its assets, had a much tougher time gaining assets in a stock market that was down 22%. On the other hand, boutiques and smaller shops focusing on a particular market segment had an easier time overcoming market depreciation and gaining assets.
Mellon Growth, established in 2001 by a team of portfolio managers that left State Street Global Advisors, Boston, grew from virtually nothing at the beginning of 2002 to $1.2 billion by the end of last year. In terms of percentages, its 7,143% asset growth last year tops the list of the biggest asset gainers among U.S.-based asset management firms in 2002, according to eVestment Alliance.
IronBridge Capital Management LLC, Oakbrook Terrace, Ill., was second in percentage terms, growing 134% to $61 million in 2002. It was followed by Causeway Capital, Arrowstreet Capital and GE Asset Management, Stamford, Conn.
Causeway spun out of Hotchkis & Wiley Capital Management, Los Angeles, in 2001. Its assets climbed 76% last year to $2.2 billion. Mark Cone, chief marketing officer, said the managers' track record at Hotchkis & Wiley helped Causeway attract clients. "Consultants knew us," Mr. Cone said.
Causeway also got a boost from pension funds that rebalanced or boosted their exposure to international equities, an asset class undervalued relative to domestic equities, he noted.
Arrowstreet Capital, another international equity manager, spun out of PanAgora Asset Management, Boston, in 1999. Arrowstreet's assets under management in 2002 climbed 73% to $2.8 billion. It landed six new large pension fund clients and $800 million in new client assets, plus $750 million from existing clients, said Bruce Clarke, chief executive officer.
Peter Rathjens, chief investment officer, said the firm's focus, performance and ownership structure - 50% of the employees are partners - help differentiate Arrowstreet in the marketplace. A three-year track record "is another arrow in our quiver," he said.
Fifth on the list is GE Asset, which saw assets rise 69% to $170 billion, according to eVestment Alliance. Some $5.3 billion came from new clients, said GE spokesman Tim Benedict. Jack Boyce, senior vice president of institutional investments, said "an intense focus" on client service fueled the growth.
Firms with big-name portfolio managers were also winners. Harris Associates, Chicago, a value shop that runs the Oakmark Funds, saw assets climb 44% to $30.1 billion in 2002. The high profile of William Nygren, portfolio manager of Oakmark Select, has helped garner business, said CIO Bob Levy. "The industry's recognition of Bill's capabilities have been a plus," Mr. Levy said.
And First Pacific Advisors, Inc., Los Angeles, has been buoyed by the name recognition of its star portfolio manager, Robert Rodriguez. The firm, which manages both fixed-income and value equity funds, saw assets climb 17% to $4.1 billion last year. Two-thirds of the new money went into the firm's mutual funds, which are predominantly held by institutions, and the rest into separate accounts, said Rich Atwood, chief operating officer.
The other big-name portfolio manager to help bring home the bacon for his firm is William Gross, CIO at Pacific Investment Management Co., Newport Beach, Calif.
PIMCO's assets climbed 26% in 2002, to $304 billion, spokesman Mark Porterfield said. Granted, PIMCO's specialty is fixed income, which performed relatively well last year. Still, Mr. Gross' household-name status enabled PIMCO to win a big chunk of the bond assets up for grabs.
Legg Mason Asset Management, Baltimore, saw assets climb 9% to $184 billion in 2002. Three affiliates - Western Asset Management, Pasadena, Calif.; Royce & Associates, New York; and Private Capital Management, Naples, Fla. - contributed to the growth; each gained more than $41 billion in assets under management, said spokeswoman Maura Fox.
BlackRock's assets increased 14% to $272 billion in 2002; Federated's jumped 9% to $195 billion.