It's been a year since Chase Manhattan Corp. created a distinct company to handle investment management for institutional clients.
Today, the banking company says Chase Asset Management Inc. is poised to make its mark.
"We are already a global multiproduct provider," said Stephen E. Prostano, chief operating officer at the unit, which has $60 billion of assets under management. "And certainly within the next three to five years we want to maintain our position and improve it and be in the top 10 in terms of asset managers."
From its inception, Chase Asset Management was meant to be an organization that would combine the nimbleness of an investment management boutique with the resources of an international banking giant. By giving the business its own identity, Chase said it would be better able to compete with nonbank rivals for clients and top-notch employees.
Far from being unique among banking companies in this regard, Chase is part of a growing trend toward capturing the entrepreneurial vigor of nonbank money managers within large, sometimes bureaucratic, corporations.
"That is definitely a trend in the marketplace," said Nancy Miller, a brokerage recruiter at Mark Elzweig Co., New York. "A number of banks are serious about it - and they have to be if they want to compete and survive."
Chase Asset Management, part of the bank's global asset management and private banking division, includes four "boutiques" that specialize in U.S. equities, global fixed income and cash accounts, international equities, and U.S. fixed income products. Operational, administrative, risk management, and marketing tasks are shared.
Assets under management have jumped 20% so far in 1996, a growth rate the bank plans to sustain, said Mr. Prostano. While the bank did not break out figures for Chase Asset Management, the global asset management and private banking group - which has $115 billion of managed assets - will post a return on equity exceeding 30% this year, said Mr. Prostano. Officials expect assets under management at the division to nearly triple by 2000, to $300 billion.
Critical to reaching those goals, say officials, is attracting and retaining talented employees. And that requires both management commitment and competitive pay. Compensation for portfolio managers at the unit ranges from $250,000 to $750,000 or more, depending on performance, said Mr. Prostano.
"We've been able to attract very significant professionals to this organization, and that's what is needed," he said. "In a typical bank organization, you are constrained by resources, and you have a lot of bureaucracy and administrative issues that you need to deal with."
Recent hirings include Pamela Carlton, a Morgan Stanley & Co. veteran, to be director of U.S. equity research and Terry Goodwin, most recently head of equity trading at UBS Asset Management, to be director of global equity trading.
The asset management division is also one of the few business lines to be dominated by executives from the old Chase, as opposed to Chemical Banking Corp. The two companies merged this year.
The global asset management and private banking division is headed by James Zeigon. Other Chase veterans in key roles include Mr. Prostano; Mark Richardson, president of Chase Asset Management; and the heads of several of the boutiques.
Mr. Prostano said separating the institutional investment management unit from the bank also helped shield portfolio managers from disruptions related to the merger integration. The key components for the new company had been agreed upon months before the deal closed, he noted.
"In the Chemical organization they had a far more decentralized approach," said Mr. Prostano. "So their organization was really not linked centrally. There wasn't an integrated approach to asset management."
But early agreement on following the more centralized Chase model made the transition easier, he said. "We've gone through the majority of integration at this point."
Having assembled what it believes to be a competitive and talented team, Chase Asset Management is aiming to broaden its product line.
"We're looking right now at expanding to the emerging markets area, and we need a high-yield capability," said Mr. Prostano. Both would fit into the boutique structure.
While the bank faces fierce competition from more established players like J.P. Morgan & Co., executives believe they have two additional strengths: a global technology network and the Chase name.
The company has invested $40 million to upgrade a network linking portfolio managers and research analysts in New York, London, Hong Kong, Tokyo, and Sao Paulo, Brazil. (See box.)
The bank expects more than half the unit's growth to come from overseas, where executives say the name "Chase" carries more cachet than it does domestically.
To generate new business, the company said it wants to build on its relationships with institutional clients that already use the bank's corporate finance, investment banking, and custody
services.
Mr. Prostano said many customers are already showing interest: "At the same time our clients seek requests for a proposal on custody operations, typically, they are asking about what type of asset management products are currently available."
Among the clients Chase is targeting are nonprofit corporations, financial institutions, and insurance companies.
Chase hopes to capitalize on the stated desire of some institutional clients to consolidate their assets with fewer managers.
"The skill-set in terms of where we ultimately want to be is in place," said Mr. Prostano. "The product-set is a very strong foundation for the future from a global perspective. And there are few areas that we would want to add to going forward."
