New strategies will be a major focus to build assets under management and remain competitive. "We will be looking at product development, like offering age-based lifecycle products. We need to focus on that," he said. Mellon offers risk-based lifestyle funds, but not age-based options. "As a retirement investment vehicle, they are very attractive," he said.
Lifecycle funds have gained popularity among 401(k) investors and continue to amass assets. Barclays Global Investors, San Francisco, recently announced that assets in its age-based lifecycle funds doubled in 2005 to nearly $10 billion.
Retirement-income products also will be a focus for Mr. Capone.
"The insurance companies have a leg up on us," he acknowledged. "The challenge is simplifying the product for participants. Annuities are very difficult to understand. Mellon could offer it as an investment option or possibly subadvise. It's something we will look at very closely."
Genworth Financial Inc., Richmond, Va., and Merrill Lynch Retirement Group, Pennington, N.J., are the only DC providers that now offer annuities as an option within a 401(k) plan. Other firms considering annuity products in the DC market include Prudential Retirement, Newark, N.J., and MFS Retirement Services, Boston.
"If you look at the industry, everyone has talked about accumulation, but now the focus has shifted," he said.
Mr. Capone said the defined contribution business is especially attractive at this time. "Look at the industry in general. It's an attractive and appealing market considering what's happening with DB plans (being frozen or terminated). We want to take advantage of the growth of DC plan business."
Mellon Asset Management, which was formed last month, comprises Mellon's 12 investment management subsidiaries, including Dreyfus Corp.'s mutual funds and Mellon Institutional Asset Management.
Mr. Capone's immediate task will be integrating the Mellon and Dreyfus Corp. sales channels. That will be no easy task. "There is a multitude of products across size and style and type, across the risk spectrum. The investment-only side of the business is broken down into three segments — direct segment, the alliance segment, and the intermediary segment," said Mr. Capone. And all of those need to be integrated into one stream.
Dreyfus Corp., New York, managed $170 billion as of Dec. 31, while Mellon Institutional Asset Management managed $629 billion at year-end.
To better align the businesses, Mr. Capone said during the next 90 days he will look to build his team, hiring sales, product, and field representatives. It is too early to tell how many people he will hire at this point, he said.