No boundaries in banner year

Barclays Global Investors, State Street Global Advisors, AXA Group, Capital Group and JPMorgan Chase & Co. each reported gains in assets under management of more than 20% among the top 10 managers in the Pensions & Investments/Watson Wyatt Worldwide World 500 rankings.

Total assets of all 500 managers in the rankings rose 12.6%, reaching a record high of $48.824 trillion for the year ended Dec. 31.

Zurich-based UBS AG and Munich-based Allianz Group AG remained Nos. 1 and 2 among the world's largest asset managers. UBS' assets under management rose 11% to $1.975 trillion, while Allianz assets increased 10% to $1.459 trillion.

Assets of the 20 largest money managers increased 11.9% to a record high of $18.2 trillion at the end of 2004, from $16.2 trillion a year earlier.

JPMorgan's assets soared 42% to $791.56 billion at the end of 2004, the greatest increase among the top 10. The surge moved the firm into 10th position from 15th the previous year. The increase was driven in large part by the company's acquisition of Chicago-based Bank One Corp., which became official in July 2004. At the end of 2003, Bank One had $190.9 billion in assets under management.

Eve Guernsey, chief executive officer of JPMorgan Asset Management in the Americas, New York, said JPMorgan also benefited from more diverse offerings in a "multiprocess" strategy adopted after the asset management unit merged with Fleming Asset Management in August 2000. The Bank One acquisition added fixed income, quantitative and real estate investment trust strategies that were offered by Banc One Investment Advisors.

The firm saw net new asset growth in 10 different products last year, led by international equity, hedge funds of funds, real estate and fixed income, she said.

Barclays Global's assets jumped more than 27% to $1.361 trillion at the end of 2004, moving it to third overall from fifth. It leapfrogged over Fidelity Investments, Boston, which dropped to fifth place despite a 13% increase in assets under management to $1.286 trillion.

Matt Scanlan, managing director and head of BGI's Americas institutional business, attributed the rise to "solid" investment performance, asset gathering and a mix of new business in the company's enhanced index and active strategies. "There has been a real move by clients to look at more alternative strategies, and a continued transformation from index mandates to long-only or long-short strategies," he added.

State Street Global Advisors, Boston, held the fourth spot again in 2004, with an increase of 22% in assets last year to $1.354 trillion. Chris Pope, senior principal and director of sales, said growth in the company's non-U.S. institutional strategies drove the overall asset increase. He said that both SSgA's passive and active strategies have seen new inflows over the last two years, while its international and global strategies were particularly successful in attracting new assets in Europe last year.

The growth in SSgA's enhanced index strategies has been "a trend that has been pervasive for the last four years," Mr. Pope said, attracting a number of new assets in Asia.

Capital Group's 22% increase in assets under management was spurred by the firm's retail offerings, said spokesman Chuck Freadhoff. Its Growth Fund of America and Capital Income Builder mutual funds were the company's fastest growing retail products last year.The Capital Income Builder fund had $36.5 billion at the end of 2004, a 62% increase over 2003, while the Growth Fund of America had $79.2 billion at the end of 2004, a 47% increase over the year before.

Mr. Freadhoff said many of Capital Group's retail funds may not have been the hottest funds in their respective categories several years ago, but they still outperformed their benchmarks during the market downturn from 2000 to 2002. He said many investors who appeared to be in the habit of chasing the hottest performers during the downturn have now adjusted to value a fund's consistency more than its potential for shooting the lights out. "Relative to a lot of those other funds, we've held up very well over the last few years, and that's helped us to attract new investors," said Mr. Freadhoff.

Citigroup Inc. and Merrill Lynch & Co., both in New York, slipped in the rankings. Citigroup dropped to 23rd place from 13th with a 24% decline in assets to $458.9 billion. However, the decrease was due to a realignment in internal business segments; the 2004 numbers do not include the assets of units such as Citigroup Alternative Investments, which had $84.5 billion at the end of 2004 and was included in past years' totals.

Merrill Lynch's assets declined by less than 1% to $496.2 billion, dropping the firm to 20th from 16th in 2003. According to the company's annual report, "market-driven appreciation and the positive impact of foreign exchange were offset by net new money outflows of $30 billion. The net new money outflows were principally in short-term institutional liquidity products and retail money market funds, as investors moved assets out of retail money market funds to higher-yielding products as short-term interest rates increased."

Deutsche Asset Management, which was one of the few companies to see its assets decrease during 2003, managed to post positive numbers for 2004. The company held its 11th position with a 2% overall increase in assets under management to $730.53 billion.

European companies Aviva PLC and IXIS Asset Management jumped into the top 20, at 16th and 18th, respectively. London-based Aviva's assets jumped 23% to $525.85 billion, while the Paris-based IXIS increased its assets 28% to $505.98 billion.

An analysis from Watson Wyatt estimates that these two firms rose in the rankings because of the absence of Kampo, the only Japanese manager to place in the top 20 last year. Kampo, in 8th place in 2003 with $877 billion in assets, was excluded from the 2004 rankings following its merger with Japan Postal Savings Fund, Tokyo, in April 2003. It has since reorganized as Japan Post and is now considered an "independent administrative institution" and not a money manager, according to Watson Wyatt.

Paced by strong global markets, the gain in assets among the 500 largest managers was spurred by strong equity markets, said Craig Bager, head of management research, Europe, at Watson Wyatt in Reigate, England.The MSCI World index returning 14.72%; MSCI Europe, 20.88%; MSCI Japan, 15.86%; MSCI U.S., 10.14%; and MSCI Emerging Markets, 22.45%.

Smaller managers also saw significant growth. The total assets of money managers ranked 251 through 500 grew by 12%, and the group's $2.9 trillion in assets is 6% of the top 500 managers' total assets. up from a bit more than 5% last year.

The 20 largest managers now represent 37.2% of the 500 managers' total assets, down from 37.4% for 2003.