MINNEAPOLIS — Clifton Group Investment Management Co. is chipping away at competition from large money managers, growing its overlay services business to $4.4 billion as of June 30 from $2.7 billion at the end of 2004.
The Minneapolis-based firm has added about a dozen new accounts this year to its "Policy Implementation Overlay Service," a strategy that includes transporting alpha, rebalancing and securitizing cash. Within each component of the program, Clifton uses derivative instruments such as futures and swaps to strengthen returns and provide risk management.
PIOS accounts for the majority of Clifton's $6.2 billion in assets under management as of June 30. Previously, Clifton has added about eight new PIOS accounts a year on average, said Jack Hansen, chief investment officer. Given the pipeline of new business, "growing (overall) assets under management about 15% a year should be sustainable over the next five years," Mr. Hansen said.
Ben Lazarus, director of sales and marketing, said there are no plans to cut off the PIOS program at a specific point.
Clifton routinely faces off in investor searches against heavyweights such as State Street Global Advisors, Boston, and Russell Investment Group, Tacoma, Wash. The firm has "done well competing against custodial banks, against the competitive advantage they hold of being the incumbent," Mr. Hansen said.
Alistair Lowe, head of global asset allocation at SSgA, acknowledged about a third of his firm's new overlay business comes from existing accounts. The firm managed $36.5 billion in U.S. tax-exempt overlay assets as of June 30, which includes strategic plan level overlay and cash equitization accounts using futures, as well as portable alpha exposure management accounts. That is up from $30.5 billion at year-end 2004.
SSgA's strategic plan management service, which is comparable to PIOS, has seen 15% growth year to date in worldwide assets, he said.