Commercial Capital Bancorp, the holding company for a small California bank that caters to wealthy people, has started an asset management unit that plans to emphasize alternative investment products.
The Irvine, Calif., banking company said Monday that it has created Commercial Capital Asset Management Inc., a wholly owned subsidiary, and CCAM MBS Advisors I Inc., a wholly owned investment advisory unit. The advisory unit is to manage a newly formed hedge fund, ComCap MBS Fund I, that invests in mortgage-backed securities.
Stephen H. Gordon, the company's chairman and chief executive officer, said the units would stress alternative investments because customers are interested in these products.
"Our clients don't need a bank to bring them mutual funds and annuities," he said. "If they want mutual funds and annuities, they'll go to Schwab or Fidelity or Wellington or Vanguard or any number of these firms directly. When it comes to mutual funds, what do they need a bank for? ... I am trying to provide products where our customers need them."
Commercial Capital says it has been successful on its terms. It was begun five years ago as a mortgage company, Commercial Capital Mortgage. Three and a half years ago, it bought a $40 million-asset savings and loan in Riverside, Calif., and opened Commercial Capital Bank with a national bank charter. In December 2002, the company went public.
Mr. Gordon said Commercial Capital has targeted high-net-worth individuals and income property investors with $10 million to $100 million of assets. It reported $1.2 billion of bank assets at March 31. Its branches are in Irvine, Rancho Santa Margarita, and Riverside, Calif., and it plans to open an office in the La Jolla section of San Diego in September. It also has loan origination offices in Sacramento, Corte Madera, Oakland, Burlingame, Woodland Hills, Los Angeles, Irvine, and San Diego.
"A lot of banking clients aren't getting good returns on money from CDs, money market funds, bonds, or other fixed-income products, and the equity market is going through gyrations," Mr. Gordon said. "People are a little snakebit. We want to bring these customers an alternative asset management vehicle. It is something that they have been asking for for a while."
Banking executives say it is difficult, though, for a bank to build an asset management business around a niche product.
"The need for hedge funds and alternative areas is small," said Ted Cecala, the chief executive officer of Wilmington Trust Corp. in Wilmington, Del. "There is a purpose for these products, but it should never be a major portion of a customer's investment portfolios."
Harold "Skip" Gianopolis, a senior vice president of wealth management services at Harris Bankcorp in Chicago, said there are opportunities for small banks to start asset management units because some customers are dissatisfied with their institutions' performance or service.
"Banks need scale in order to have the resources to deliver the kind of products that customers expect," Mr. Gianopolis said. "Customers are looking for new asset managers, but firms have to be willing to offer something different."
Geoffrey Bobroff of Bobroff Consulting, an East Greenwich, R.I., firm, said it is difficult to displace existing asset managers that offer "bread and butter" products such as mutual funds and annuities. By offering added value in products and services, Commercial Capital could stand out, he said.
"Investors that purchase specialty products are fewer and savvier," he said. "It is a challenge to offer alternative investments. I am not saying that they cannot be successful. But they will have to show that they can add value."
Mr. Gordon said he plans to add more alternative investment products to the platform.
"We want to create more of a private banking type of service for our clients," Mr. Gordon said. "We are trying to take advantage of markets as they are in a state of flux. We want to bring a sophisticated product to our clients. ... We are bringing our clients products that are generally only available to institutional clients."
