National City Corp. didnt bring in John Abunassar three years ago to run just another sleepy, bank-owned money manager. It wanted change and it wanted innovation – and it wanted both relatively quickly.
At a time when other banks were dropping out of money management, National City executives wanted to dive deeper into the business. Thats where Mr. Abunassar stepped in.
The former Bank One executive has spent the last three years overhauling what used to be known as National City Investment Management, moving the money management operation beyond providing just plain vanilla fixed-income strategies to institutional investors. Now known as Allegiant Asset Management Group, the firm has expanded its offerings to include quantitative investment strategies, 130/30 strategies, enhanced index strategies, with global equities and hedge fund offerings potentially looming on the horizon. The goal, he said, was to create a firm that was a multiboutique one that could easily add new investment management talent anywhere Mr. Abunassar can find it.
While turning the firm upside down, Mr. Abunassar has also managed to increase Allegiants assets under management by roughly 10% over the last three years. But now that the heavy lifting is complete, he said that Allegiant is ready to explode and take its game to a whole new level.
From a macro level, how have you changed the business? We have completely rebuilt the firm from when it was just National City Investment Management a few years ago. In three years we have shrunk the headcount by 20%, while at the same time roughly 50% of the people here now are new. We cut a number of positions that were redundant or not touching the clients on some level. Now, what we are trying to do, what we are trying to execute and communicate is that we are a dynamic, multiboutique firm with a lot of innovation and we are ready to explode.
Are you done with the overhaul? The transformation, from a macro level, is now complete. You will not see anymore wholesale changes.
Why did you feel compelled to change the business so much when you took over? Before, the weaknesses were everywhere. There were issues both on the manufacturing and the distribution sides of the business. If you dont have manufacturing, you cant win in asset management. We have rebuilt everything on the manufacturing side that we had in place except for the fixed-income and midcap teams. And while we have brought in proven teams to run new strategies, we needed to completely rebuild the distribution too. For instance, we never had a consultant relations team. We had no specialists who were out there in the market talking to clients and consultants trying to find out what people need and want. We werent going where the market was telling us.
And now, how do you describe the firm and how will you define it moving forward? Its important that we stress and maintain our multiboutique concept. These investment teams are entirely independent, although supported by centralized sales and operations, and theyre based all over the country. We brought in a large-cap value team in West Palm Beach, a large-cap growth and core team in Pittsburgh, a quant team in Chicago and a small-cap team in St. Louis over the past three years. They can operate as separate entities, for the most part, but we also stress the importance of sharing ideas and concepts in weekly meetings with all of the investment teams. We spend a lot of time talking about this structure and finding the balance.
How did you go about deciding who the right people and teams are to plug into your new model? In acquiring firms or teams, we are very opportunistic. Theres so much going on in the industry, which means there are a number of chances and places to find talent. Right now we are still looking; I would say we are aggressively opportunistic. I love alternatives and we are looking at adding hedge funds and hedge fund of funds, but its also the height of the market so you have to be careful. For the most part, Id say we are looking at acquiring struggling managers firms that just cant figure out how to grow on their own. And having a multiboutique strategy has helped us generate a ton of interest from teams or shops looking for a new home. People are finding it to be a really attractive concept
So you are still looking at adding new strategies and teams? Well continue to create new strategies. We are also beginning to roll out some of the new strategies that we have been developing. We develop these strategies based on client demand; we need to listen to the market. The small-cap 130/30 strategy we just rolled out is a great example of that. A lot of clients have told us that they want more exposure to alternative investments, but they dont want to take the leap into full-blown alternatives. Its a blended product that people are comfortable with, it bridges the long-only and alternative worlds, and were finding that is what more and more institutions want. Were looking at adding a number of new strategies, particularly international small-cap equities. You have to consider areas where there is significant demand but also capacity constraints. Were also looking at adding more global equity strategies. Adding a global boutique to our offering is something I would love to do.
We also have enhanced index strategies in the works and we have two of these products seeded already. These are being driven by our quant team in Chicago, and I expect a lot of innovation to come out of that office.
How will you know if, and when, your transformation is working? After three years were starting to see breakthrough results. This is the time for us. We expect people to see that we have executed on our strategy to rebuild the business, and that should be rewarded by the market. Were at $29 billion right now; Id like to see us at $40 billion in about two years.
And how has National City responded to the plan? How are they involved and what kind of support to they lend? Theyre a great parent. Asset management is an area where they have gotten more comfortable. This is a business where other banks often struggle. Having independent teams and entities is not a bad thing. As a parent, they have recognized this and have been supportive of the new model. In some cases they have helped us with seed money when we have incubated new strategies. They have basically proven that if we can come up with a good business case for something, then they will help us. As long as management gets it, this is a stable, reliable business.
But is this a business that they want to stay in? We have gotten a number of calls from private equity firms and other asset managers who are interested in us. National City has been, over the last few years, shedding other business that it considers to be non-core. Now we have our core businesses in place and asset management has clearly been prioritized as one.