A few managers find room to grow amid difficult times

The largest defined contribution managers overall posted a huge loss last year in total assets, but a few big players managed to not only weather the storm but post significant growth, according to Pensions & Investments' annual money manager survey.

Slammed by free-falling domestic and international equity markets, the 25 largest DC managers last year suffered a 22% drop in total U.S. institutional tax-exempt assets to $2.181 trillion. Internally managed institutional tax-exempt assets for the top 25 also fell 20% to $1.941 trillion.

Last year's numbers were adjusted to exclude Capital Research & Management Co., Los Angeles, which did not participate in this year's survey.

(The survey showed internally managed U.S. institutional tax exempt assets for the top 500 money managers decreased 23% to $8.452 trillion).

But as DC plan participants fled equity investments for safer havens, fixed-income and stable value shops were able to gain some ground and advance in the rankings of the largest DC managers. Pacific Investment Management Co. LLC, Newport Beach, Calif., manager of the world's largest bond fund, rose to seventh place from 11th in 2007, thanks to a 35% increase in U.S. institutional tax-exempt assets to $98.54 billion. Stable value stalwart Dwight Asset Management Co. of Burlington, Vt., jumped to 13th place from 17th after assets climbed 21% to $53 billion.

“About half of our growth came from successfully landing roughly 20 new clients, and the other half came from increased cash flow into our funds from existing customers,” said David Richardson, Dwight Asset managing director. “There was a real flight to safety by many shell-shocked 401(k) participants, especially in the fourth quarter.”

BNY Mellon Asset Management, New York, which offers a mix of equity and fixed-income investments through its 11 boutique managers, hopped to the 11th spot from 19th in 2007 on the strength of its 39% asset surge to $59.36 billion. Robert Capone, president of BNY's retirement and subadvisory group, said the growth was a result of “dedicated focus” on asset gathering over the past three years. “We've really done a great job promoting the benefits of our bank collective trust funds, which offer the same professional money management as a mutual fund at a cheaper price.”

There were also five newcomers to the top 25 list this year: Galliard Capital Management Inc., Minneapolis, 16th, with $34.56 billion in U.S. institutional tax-exempt assets; Nationwide Financial, Columbus, Ohio, 21st, $21.64 billion; Legg Mason Inc., Baltimore, 22nd, $19.12 billion; AllianceBernstein LP, New York, 24th, $18.31 billion; and Delaware Investments, Philadelphia, 25th, $17.95 billion.

Market volatility didn't shake anything loose at the top of the list. Fidelity Investments, Boston, retained its No. 1 ranking despite a 30% drop in assets to $366.98 billion. New York-based TIAA-CREF held its second-place rank even though assets declined 17% to $327.56 billion.

Bertram Scott, executive vice president and chief institutional development and sales officer at TIAA-CREF, said despite market losses his firm was able to grab new clients last year. “Last year, more than 245,000 people moved their money to TIAA-CREF and clients and prospects continue to turn to us,” Mr. Scott wrote in an e-mail. “And so far this year, more than 30 institutions planning to consolidate vendors have chosen us.”

Vanguard Group Inc., Malvern, Pa., held on to third place with $252.11 billion in assets, a 21% decline. Barclays Global Investors NA, San Francisco, remained in fourth place even though its assets decreased 32% to $150.64 billion.

“BGI's decline in assets was tied to the decline in the overall markets — not due to poor fund performance,” said Kristi Mitchem, managing director and head of U.S. defined contributions at BGI. “We're still bringing in new business, and added a new client every week during the first quarter.”

Rounding out the top five is State Street Global Advisors, Boston, which saw its assets decrease 38% to $126.81 billion.