Over the next year, Mr. Kase said he believes ING's fixed-income strategies in particular will make considerable inroads with institutional investors.
"The marketplace is looking for alternatives to the oligopoly," said Jim Kauffmann, senior vice president and head of fixed income at ING, referring to the dominant fixed-income marketshare held by three firms — Pacific Investment Management Co., Newport Beach, Calif.; Western Asset Management Co., Pasadena, Calif.; and BlackRock Inc., New York. "Outside of the Big Three, there's room for others to establish themselves as four, five and six. We think we're in a good position to be in that tier."
ING's core-plus fixed-income strategy — which has $3.5 billion in assets under management but only $369 million, or 11%, of that from institutional investors — has the potential for considerable growth over the next year. "Because of the competition, it's the hardest area of the market to penetrate," said Mr. Kase, who added that ING has established the core-plus strategy with 12 of the major investment consulting firms during the past year.
The core-plus strategy has outperformed the Lehman Aggregate index every year since its inception in 1999. For the seven-year period ended Dec. 31, the strategy has produced a 7.99% annualized return, beating the Lehman Aggregate index by 2.31 percentage points, according to the eVestment Alliance database. Over the one- and three-year periods, the ING core-plus strategy has outperformed the index by 1.22 and 1.6 percentage points, respectively.
In addition to fixed income, Mr. Kase said ING's quantitative equity and large-cap growth equity products are "immediately sellable" and added he aims for the new sales effort to further push these strategies into the institutional marketplace over the next year.
The quantitative equity products, Mr. Kase added, will also help to introduce institutional clients to the firm's fundamental equity products. He said ING took steps to rebuild its fundamental equity operation in the last two years under Christopher Corapi, senior portfolio manager and head of fundamental equity, who joined the firm in 2004 from Federated Investors Inc.
While the overall performance of ING's fundamental equity strategies has picked up since Mr. Corapi joined the firm, for several years many of the strategies significantly underperformed the markets. Mr. Kase said that many of the fundamental strategies will have a three-year track record in late 2007.