As the bidding war for Zurich Scudder Investments nears finality, the firms clients are waiting to see if the casualties of the acquisition will be detrimental to their portfolios.
Many plan sponsors agreed that the sale of the firm is not a crucial element of concern. But when its portfolio managers start walking and the performance numbers start falling, board members will lose confidence and plot a plan of action to replace the firm.
Zurich Scudders partial client list includes heavy weights New York City Retirement Systems, California State Teachers Retirement Systems, Motorola Inc. and Farmers Group, according to Nelsons MarketPlaceWeb.com. ( Nelsons is owned by Thomson Financial, publisher of Mutual Fund Market News)
The pending sale of the firm and all other matters "is an issue for the board to take up," said a representative with the City of Atlantas pension funds said. The $1.25 billion Atlanta Pension Funds, Atlanta, has employed Zurich Scudder for more than five years. The firm manages approximately $123 million of its pension assets, the representative said. Zurich Scudder also manages more than $1 billion for New York Citys Retirement System, which declined to comment on the developments.
Thomas Sims, administrative director of the $1.2 billion Parochial Employees Retirement System of Louisiana, said the board is not planning any action based on Zurich Scudders auction block status. He did say, however, that the firms performance has been "somewhat disappointing lately."
The Baton Rouge, La.-based system does not scrutinize managers by putting them on a watch or probation list. Instead, the members have sit down discussions about performance issues. If the numbers stay south of expectations over a variable amount of time, then they take action. The board continues to have faith in Zurich Scudders managers who run $65 million worth of international equities for the system.
"I dont think [disappointing] performance is a result of the changes there," Sims said. "The team remains focused on the international equity product, but some stock selections and weighting has gone against them they do a good job of keeping us abreast of the happenings of the firm."
Zurich Scudder manages more than $28 million in large-cap value stocks for the $276 million Fort Lauderdale General Employees Retirement System. Florida Pension Administrator David Desmond said the firm has been one of the funds top performers in the bear market. Consultant Richard Dahab of Dahab Associates of Bay Shore, N.Y., has been tracking Zurich Scudders sale process. Desmond said the firm will remain in safe territory as long as the team stays intact.
The $4 billion Dallas-based Army & Airforce Exchange Service has kept Zurich Scudder as a manager for the past five years. The firms open communication policy has kept the decision-makers at the system content. The board, however, continues to pay a fair amount of attention to Zurich Scudder because changes could ensue, Investment Manager Richard Jones said. He declined to say whether Zurich Scudder is on its watch list.
Dresdner Bank has been dubbed the favorite potential suitor to acquire Zurich Scudder, from insurer Zurich Financial Services Group. The gargantuan German bank intends to lay between $2.5 billion and $3 billion on the table to purchase Zurich Scudder, according to a Wall Street Journal article published on Sept. 6.