Expecting the economy, and markets, to rebound this year, some banks investment strategists and mutual fund executives are creating products, hiring, and forming new units that emphasize the growth-oriented investing style.
"PNC and many institutions are looking to expand their product set. We want to be able to provide diversification into many areas, especially on the aggressive growth side," said Jeffrey Kleintop, the chief investment strategist at PNC Advisors, a unit of PNC Financial Services Group Inc. in Pittsburgh.
In his annual investment outlook, released Feb. 7, Kleintop said that he expects the recession to end within nine to 12 months. In the interim, he wrote, investors should choose growth- over value-oriented funds and small- and mid-cap portfolios over large-cap.
He does not expect a "runaway rebound" and advises investors to remain well-diversified, Kleintop said, but they should "tweak their diversification" to add growth products. To fit that approach, he said, banks must tweak their array of products.
"Banks have to build and offer a product set that offers what the clients want," he said. "We have to expand our universe and offer a top-tier quality of mutual funds across all the asset classes."
At PNC Advisors, he said, this will mean expanding the number of growth funds to make sure a product is offered for every growth sub-strategy. The unit has a momentum growth fund, but Kleintop said it is considering adding other growth funds, with varying levels of aggressiveness.
Other banking companies also are looking to enhance growth products in preparation for a market recovery. Kevin Bannon, the chief investment officer at Bank of New York Co., said it is considering the addition of a mid-cap growth fund to the large- and small-cap growth funds already offered.
"You are going to see people leaning toward growth over the next few quarters," Bannon said. "This recession has made investors very aware of managers based on style. I think people are starting to realize the array of styles within growth and value that are available."
Last fall, Mellon Financial Corp. created Mellon Growth Advisors, an asset management unit to focus on growth equity investing for institutional clients. Joseph Ailinger, a spokesman for Mellon, said the unit, which also subadvises the Dreyfus Premier Growth Funds, was not created to capitalize on expected market movements but rather to expand Mellons roster of growth offerings.
Sung Won Sohn, the chief economist at Wells Fargo & Co., said it is typical during an economic recovery for investment managers to choose growth over value.
"Growth stocks and growth products tend to benefit the most from a recovery, but we are still near the bottom of the recession," he said. "There are not too many people predicting a surge in economic growth anytime soon. For now, good value plays remain the best bet."
However, Sohn said, though a strong rebound is not on the horizon, now is a good time for banks and fund companies to expand their product sets.
Lloyd Wennlund, the managing director of mutual funds at Northern Trust Corp., said the Chicago banking company bought a value manager, Carl Domino & Associates, two years ago to expand its product offerings and its value funds had $184 million of inflows in 2001. Filling gaps is important, he said, but banks should not panic.
"So many clients and institutions want to try to follow and anticipate trends," he said. "Investing is less market timing and more asset allocation."
Wennlund said that Northern Trust, which manages $48.9 billion of mutual fund assets, does not need to enhance its group of growth products right now.
State Street Global Advisors announced last Tuesday that it will enhance its growth offerings by hiring the portfolio manager Gardner Jackson to expand its large-cap equity team. Jackson is to work with four other asset managers to oversee $1.6 billion of assets invested in core funds, socially responsible funds, and large-cap growth funds.
Don Cregg, State Street Global Advisors private asset management sales manager, said that despite Mr. Jacksons hiring, the unit has no immediate plan to add products because it already has all the product lines covered.
He said the State Street unit is prepared for whatever the market throws at it.
"State Street has been around for 200 years. We have been through recessions and depressions and crashes, so we dont tend to panic in these environments," Cregg said. "We arent looking to lunge to the strategy du jour. We want to take a long view of every situation for our clients."