Painful ride for equities last year

Fidelity Investments had the most internally managed active-domestic-equity assets for U.S. institutional tax-exempt assets clients last year.
MAY 24, 2009
Fidelity Investments had the most internally managed active-domestic-equity assets for U.S. institutional tax-exempt assets clients last year. But don't expect a lot of celebration at its Boston headquarters; Fidelity's assets had plummeted 45% to $172 billion as of Dec. 31. For Fidelity and other active-domestic-equity managers, 2008 was a year to forget. Actively managed domestic-equity assets overall fell 41% last year; the Russell 3000 Index slid 37.3%. Among the 25 largest managers of those accounts, actively managed domestic equities dropped to $709 billion as of Dec. 31, down 54% from a year earlier. The dollar figures reported in this story reflect internally managed assets for U.S. institutional tax-exempt clients.
Overall, “it was a very terrible year for active managers,” said Janice Fritz-Snyder, head of U.S. equities at Watson Wyatt Worldwide in Arlington, Va. She said that one reason so many active managers underperformed the benchmark indexes for the category is that active equity became an easy target for investors who wanted to raise cash because of the liquidity crisis. “There was a lot of panic,” Ms. Fritz-Snyder said. “People were just selling out.” Capital Guardian Trust Co. had the biggest slide in active domestic equities last year. It was down 65% to $11.34 billion. Also posting dramatic losses were BNY Mellon Asset Management, down 58%; AllianceBernstein LP and Legg Mason Inc., both down 53%; Lord Abbett & Co. LLC, down 48%; and Waddell & Reed Asset Management Group, down 45%. Officials at most of the managers laid the blame primarily on the market decline. Mike Dunn, a spokesman for BNY Mellon of New York, said that some of that manager's losses came from the company's divestitures of Estabrook Capital Management LLC of New York and GWK Investment Management Ltd. of Boston last year. “The main issues were market losses and the divestiture of two businesses that were in the active-domestic-equity space,” he said. “There were some client losses too.” John Meyers, a spokesman for AllianceBernstein of New York, and Maria Rosati, a spokeswoman for Legg Mason of Baltimore, agree with Adam Banker, a spokesman for Boston-based Fidelity, who attributed their companies' losses mainly to the decline in the markets. Maura Griffin, a spokeswoman for Capital Guardian's parent, Capital Group Cos. Inc. of Los Angeles, and Kimberly Weinrick, a spokeswoman for Lord Abbett of Jersey City, N.J., both declined to comment.

SMALLEST LOSS

Reporting the smallest loss among the 25 largest managers of active-domestic-equity assets last year was T. Rowe Price Group Inc., which reported a 9.8% drop to $89.81 billion in active-domestic-equity assets managed for U.S. institutional tax-exempt clients for the year. T. Rowe attributed its relative success to “strong new business activity in both the defined contribution and defined benefit areas of the firm,” said Brian Lewbart, a spokesman for the Baltimore-based firm. “This was supported, especially in the defined contribution area, by the positive flows into our target date retirement portfolios and continued growth in adoption of auto-enrollment, which contributed to strong inflows from DC plan participants,” he said. Other managers with relatively strong showings were Principal Global Investors, down 15.9% for the year, and JPMorgan Asset Management, down 21.6%. Paula Chizek, a spokeswoman for Principal of Des Moines, Iowa, attributed the company's relative success to its ability to retain clients. “Our clients believe that our process will continue to outperform over time,” she said. Mary Sedarat, a spokeswoman for New York-based JPMorgan, credited its performance to inflows into its large-cap-core-plus portfolio, a 130/30 strategy. “The assets in that strategy increased 43% in 2008, and that was one of the primary drivers,” she said. One notable omission from the 2008 ranking is Capital Research and Management Co., another Los Angeles-based unit of Capital Group. The firm, which reported $172.4 billion in actively managed domestic equities for U.S. institutional tax-exempt clients at yearend 2007, didn't respond to repeated requests for comment. The overall totals were adjusted to account for the firm's absence in calculating asset declines. Doug Halonen is a reporter for sister publication Pensions & Investments.

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