CHICAGO - The firm formerly known as Kemper has spent the first part of 1996 regrouping from more than a year of uncertainty and now is seeking to expand its reach.
Zurich Kemper Investments, formed in January by Zurich Insurance Group's acquisition of Kemper Financial Services Inc., is expanding its institutional product line and adding marketing manpower to sell it. Zurich Investment Management, the institutional money management unit within Zurich Kemper, has added 13 products mirroring some of the more successful retail mutual funds of its sister company, Kemper Funds, and is building up a marketing and client service infrastructure to support them.
An investor group headed by Zurich Insurance acquired KFS' parent, Kemper Corp., in April 1995 for $2 billion in cash and stock after nearly two years of merger attempts. After the sale closed Jan. 4, the insurer's Kemper Financial Services subsidiary became Zurich Kemper Investments Inc.; its institutional money management unit, Kemper Asset Management Co., became Zurich Investment Management, and its mutual fund family retained the Kemper name.
Freed from the worry of an impending acquisition, management is now concentrating on building the asset base, which was eroded by client defections during the merger attempts, said Laurence Cheng, president of ZIM.
"We've kind of been in the penalty box for the last two years" because of the ownership issues, said Mr. Cheng. But now that the issues are resolved, the firm is getting additional money from clients again and is being visited by consultants who had not come by in awhile, he added.
Zurich Investment Management has brought in $600 million in new business since the Kemper sale closed Jan. 4, said Executive Vice President Robert D. Weiss, who was appointed this spring to head the firm's marketing efforts.
Additionally, the firm recently was among the nine managers chosen by Equitas Holdings Ltd., London, to handle a $10.9 billion fund set up to pay some liabilities of insurer Lloyd's of London. ZIM's take could be $750 million to $1.5 billion, depending on the size of Lloyd's U.S. liabilities, said Mr. Weiss.
Zurich Kemper Investments has $79 billion in assets, $34 billion of which is insurance, pension and endowment assets managed by Zurich Investment Management; Mr. Cheng said he hopes to increase that $34 billion to at least $60 billion by the end of the century. That rate of growth is within the firm's reach, he said.
"We really had not invested in the business. We had not focused in the business," he said. With the merger behind them, management is now concentrating on expansion, he said.
ZIM is building a sales and marketing structure where "brand managers" will be in charge of marketing particular product lines - such as equities, fixed income or insurance products - and developing new products within those lines, said Mr. Weiss.
ZIM recently hired Robert LeClerq, a consultant with SEI Corp., as a director in charge of marketing to pension funds, and is negotiating with candidates for two other positions - a prospective brand manager for international and equity products and a regional sales representative for the eastern states.
Additionally, ZIM is still searching for three other professionals, a brand manager for alternative investments and two sales professionals - an insurance products specialist and a regional sales representative for the central states, said Mr. Weiss.
The growing sales force has an expanded product line to sell, which has grown by spinning off separate account products mirroring its more successful mutual funds. Mr. Weiss said when he joined ZIM in the spring, the unit had only three institutional products and now it has 16, with more on the way.
ZIM is introducing a venture capital fund of funds Sept. 15. It will invest mainly in early stage venture capital of small companies, an area pension funds tend to avoid for fear of owning too big a share of any one company. ZIM also plans to launch shortly a technology fund for institutional investors based on Kemper's mutual fund, several quantitative equity products with different tilts and a low-fee enhanced index product aimed at competing with indexing, instead of active management, said Mr. Weiss.
"We really had not devoted attention to products," said Mr. Cheng. Kemper was known mainly as a fixed-income shop, but it has a full range of products people don't focus on, such as municipal bonds, high-yield bonds, global equities and venture capital capabilities, he said. Most investment areas are well covered now, said Mr. Cheng, but he noted he would like to add a small-cap equity product, either through internal growth or an acquisition.
ZIM would like to expand into more alternative investments and also become more global in nature, said Mr. Weiss. He noted the firm has retained Investment Counseling Inc., West Conshohocken, Pa., to seek out strategic acquisitions, particularly niche players such as hedge funds, venture capital, private equity and overseas capabilities. Although Kemper exited the real estate business before the Zurich merger, and ZIM is not looking at that asset class, Mr. Weiss said it might make sense to acquire some real estate investment trust capabilities down the road.
While it is focusing on adding institutional products and marketing to pension funds now, ZIM's 1997 focus will be on gathering subadvisory assignments such as wrap-fee programs and hedge funds. Mr. Weiss said he hopes to put together a separate sales group for that purpose.