American Century Investments will continue being an acquirer, its departing president and chief executive officer and his successor said, as banks and insurers that never got large enough in the fund business to profitable look to quit it.
“We have a degree of scale that gives us a competitive advantage going forward. When we speak of acquisition, we plan to be acquiring fund assets,” said William M. Lyons in an interview Thursday after he announced his plan to retire as president and CEO at the $103 billion fund company. “We don’t see ourselves being bought in the immediate future.”
The Kansas City, Mo., company announced Thursday that Jonathan S. Thomas will succeed Mr. Lyons on March 1. Mr. Thomas, 43, is an executive vice president and the chief financial officer. Mr. Lyons, 51, had run the company for 10 years and has worked there for 20.
Mr. Thomas said American Century would continue looking to buy mutual fund assets that could be absorbed into existing American Century funds.
“We don’t buy companies, or infrastructure, or people,” he said. “We get calls from banks and insurance companies all the time that got into the mutual fund business when all of this looked more attractive and now they are looking to exit because they have a primary relationship with their customers that is just more important.”
The company has made two acquisitions in the past year. In April, it closed a deal for 11 Mason Street funds from Northwestern Mutual Life Insurance Co. The funds’ assets were reorganized into 11 existing American Century portfolios.
In September, American Century announced an agreement in principle to buy the retail mutual fund assets of Kopp Investment Advisors, a Minnesota fund company founded in 1990. When the deal closed this month, the two acquired Kopp portfolios, comprising $350 million of assets under management, were integrated into existing American Century funds.
Mr. Thomas said he could see making other small deals like this but that this is not his only focus. “I think we are really looking to grow organically with strong performance, but we are also looking to pick up some acquisitions when the fit is right.”
Mr. Lyons said the trend toward open architecture in the bank channel has improved American Century’s distribution in the past couple of years and he expects this to continue.
Analysts said there will be many opportunities for an established fund company like American Century to purchase in the next few years. Mr. Lyons agreed.
“There are large financial institutions, including banks, that started subsidiaries and small fund managers that just didn’t grow,” he said. “It is hard for these fund managers that are part of a larger organization to grow. If you have $500 million or $1 billion of mutual fund assets, it is hard to really make a go of this if that isn’t part of the mission of the firm. Many of these firms are choosing to exit, and that is an opportunity for us.”
American Century set its succession plan a year and a half ago, picking Mr. Thomas to be promoted when Mr. Lyons retired.
Mr. Thomas said he has spent the past 18 months working closely with Mr. Lyons to insure an easy transition. “I don’t see us making any radical shifts in strategy,” he said.
Mr. Lyons said, “I am not retiring to join another firm or a competitor. He plans to take some time off to travel and spend time with his family, he said, and in the next couple of years he could see himself seeking a job in teaching, government, or a nonprofit company. “It would take a special for-profit job to entice me back,” he said.
Mr. Lyons was hired in 1987 as assistant general counsel when American Century was Twentieth Century Investments. He was named general counsel in 1989 and promoted to executive vice president in 1994. In 1996 he became chief operating officer and in 1997, president. He assumed the additional role of chief executive officer in 2000.
American Century has nearly doubled its assets under management from the $52 billion it had when Mr. Lyons assumed the presidency 10 years ago. Mr. Thomas said he wants to maintain that momentum.
“We will look to expand distribution through third-party channels and expand our investment management capabilities,” he said. “That will mean some hiring of wholesalers to spread the word about the products that we are offering.”
Mr. Lyons said, “We have positioned ourselves strategically as a pure-play asset manager. Right now, banks, brokerage companies, and insurance firms are interested in offering best-of-breed to their customers, and we are well-positioned to take advantage of that.”
