American Century Investments has been hammered by the market downturn but is positioning itself for brisk growth at home and abroad, according to its top executive.
In July the Kansas City, Mo., mutual fund company opened its first international outpost, in London, and it currently working to set up shop in Hong Kong to serve the Chinese market, said Jonathan Thomas, its president and chief executive officer.
Also, American Century is stockpiling cash in anticipation of acquiring funds from small players, including banks and insurance companies, Thomas said.
"We hope to take advantage of some of the dislocation that's been occurring in the market," he said. "We are seeing a lot of opportunities with banks that started up asset management firms [and that] have $5 billion or less."
The company will target banks and insurers whose performance problems and regulatory costs have made their asset management efforts "not as fun as they used to be," Thomas said.
Assets in American Century's long-term funds plunged by more than 30% this year through November, to $50 billion, according to Morningstar, and Standard & Poor's said in a recent report that it expects "further market weakness to pressure asset balances into 2009" throughout the asset management industry.
Thomas said he is not worried. When he took charge of the privately held company two years ago, he led changes in its performance measurement and incentive systems to make them more forward-looking, and American Century's owners likewise are "very long-term-oriented," he said.
American Century also wants to strengthen its institutional business while it expands abroad. The 50-year-old company, which for years was known as a direct-sold retail fund family, wants to raise its overall performance to the exacting standards of institutional clients, Thomas said.
Institutions are looking for the ability to beat benchmarks and stay true to a style, he said. They also "demand extraordinarily high levels of service, responsiveness and a consultative capacity, as well as a willingness to customize.
"The thought is that if we can satisfy institutional clients, we'll be successful in other channels as well," Thomas said. About 29% of American Century's assets under management are institutional, according to a spokesman for the company.
Good by Comparison
American Century is touting the performance of its funds, which look good next to many of its peers. It is running print advertisements boasting that it ranks "No. 1 among the top 25 U.S. diversified asset managers offering more than five mutual funds, with 62% of our funds rated four and five stars by Morningstar."
Those rankings reflect American Century's focus over the past two years on improving performance, and should help it land institutional business, Thomas said.
A key executive in the drive in the institutional market is Enrique Chang, an institutional investment management veteran, who became American Century's chief investment officer in 2007.
This spring, the company hired Joseph Craven as senior vice president of its institutional business, and Craven is now leading the sales initiative, Thomas said. The company also fortified its institutional sales staff significantly this year, and 2009 will be "a year of execution," Thomas said.
The CEO acknowledged that the move into international territory was overdue.
"This firm had been almost exclusively focused on the U.S. market," he said. "Of the top 25 managers in the U.S., we were the only ones not sourcing assets internationally."
American Century's rivals likely will continue their international expansion, according to Standard & Poor's report. It is "a top priority for many asset managers and a long-term catalyst in the industry," according to the report.
Though the economic slump is being felt around the world, the investment management market is not thoroughly developed in other regions, which gives American Century the opportunity to gain additional scale, Thomas said.
"The U.S. market might qualify as overserved at the moment," he said. Thus, American Century does not want to "have all assets following a single economy," which is another strong motivation for the international push, he said.
According to an American Century spokesman, assets resulting from international mandates currently account for only about 1% of the firm's assets.
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