Despite signs of retreat in the bull market, a number of mutual fund companies are spending hundreds of millions of dollars apiece to expand their operational, technical and training facilities.
Vanguard, of Malvern, Pa. is spending $500 million to expand its headquarters while Janus and Invesco, both of Denver, are spending $100 million and $50 million, respectively, on new headquarters. ING Funds is spending an undisclosed amount to build futuristic U.S. headquarters in West Chester, Pa. (MFMN 3/27/00) Fidelity Investments of Boston is building facilities to handle an additional 3,800 employees, or approximately a 12 percent increase of its current workforce of 31,000. (MFMN 9/1/00) Charles Schwab & Co. of San Francisco has just opened a new, 400-person call center in Austin, Texas. (MFMN 9/29/00)
Business has been good, said spokespeople from the firms. Even if asset flows begin to shrink, Vanguard needs additional facilities to serve its existing 15 million shareholders with $575 billion in assets under management, said Brian Mattes, a spokesperson for Vanguard.
By the end of this month, Vanguard will open a new, 120,000-square-foot training and conference center on a 245-acre parcel in Malvern, adjoining its existing headquarters, that it bought earlier this year, Mattes said. Vanguard is still developing another 215-acre parcel that it bought in 1992, where it hopes to finish yet another, 120,000-square-foot building by the end of 2001, Mattes said. Vanguard has not yet determined how it will use that building, Mattes said.
"It's true that we had a record-level cash flow in 1999 - $50 billion - but that doesn't compare to the $575 billion we have under management," Mattes said. "The belief that if sales are off, you've had it, is a fallacy. The assets you have need to be served regardless."
The training facility that Vanguard is opening this month fits in with the firm's deeply entrenched belief in training, Mattes said.
Fidelity, meanwhile, is planning to be able to hire an additional 3,800 employees over the next two or three years because retail and defined-contribution sales have been strong, said Vincent Loporchio, a Fidelity spokesperson.
Loporchio declined to disclose how much Fidelity is spending on construction. However, if Fidelity fills all of these positions, it would mean a 12 percent increase in its current work force of 31,000.
Fidelity was scheduled to announce Oct. 12 that it would break ground on a 250,000-square-foot addition to an existing, 350,000-square-foot retail investor call center in Merrimack, N.H., Loporchio said. While this facility largely houses telephone reps, it is also the headquarters for Fidelity's fixed-income division, he said. Here, Fidelity manages $280 billion in bond and money market mutual funds, he said. The facility also houses telecommunications, systems and e-commerce business units, he said.
The new space will makes it possible to hire an additional 1,200 employees and is scheduled to be completed in the fall of 2001, Loporchio said.
Fidelity announced the groundbreaking on another major construction project in early September in Marlborough, Mass. to accommodate an additional 2,000 employees, primarily in the retirement services area. (MFMN 9/1/00). Fidelity wants to be prepared for the continuing growth of its benefits outsourcing and 401(k) retirement services business, a Fidelity spokesperson said.
Fidelity currently has 3,000 employees in the Marlborough facility. Once construction of the additional 125,000 square feet is completed in 2002, the site will be able to accommodate a total of 5,000 employees.
Fidelity began work on a third major construction project in June, Loporchio said. At that time, the firm announced plans to build a new retail phone center within an existing Fidelity building in Smithfield, R.I., to be completed by the end of this year, Loporchio said.
Invesco said it was building a new corporate headquarters "to keep up with its phenomenal growth." With more than 275,000 square feet, the new, six-story tower will be 100,000 square feet larger than Invesco's current facilities, the company said. It is currently scheduled to be completed in 2001, the company said. Already, Invesco is planning to build still more space - approximately another 275,000 square feet, the company said.
Janus plans to build a massive new facility capable of accommodating an additional 2,000 customer-service personnel in Denver, said Shelley Peterson, a Janus spokesperson. It will have between 800,000 and 1.2 million square feet for Janus' investor communications and operations departments. Janus currently has 2,000 employees working in these departments in three different locations, Peterson said. The new facility will not only bring them together but also enable Janus to hire an additional 2,000 people in that department, Peterson said. Construction is expected to begin by mid-2001, Peterson said. Janus is expected to spend $100 million on the new building, according to The New York Times. Peterson declined to confirm the expected cost of the building.
An additional 400,000 accounts at Schwab so far this year prompted that company to open a fifth call center, in Austin, Texas, a Schwab spokesperson said. Schwab currently has 7.3 million accounts, up from 6.9 million at the end of 1999, the spokesperson said.
Expansion due to asset growth and anticipated changes in the service end of the fund industry makes sense, said Geoffrey Bobroff, president of Bobroff Consulting of East Greenwich, R.I.
"Janus and Invesco had substantial asset growth in the last 24 months, and they probably have to staff up for additional assets," Bobroff said.