With a freshly hired slate of managers on tap, First American Corp. in Santa Ana, Calif., best known as a purveyor of title insurance, is expanding its lesser-known investment management and trust subsidiaries.
And in 2001, the company says, it will begin marketing asset management services externally.
First American Capital Management will expand its marketing range by looking for outside business as well as cross-selling opportunities among subsidiaries of the parent company, said Roddy R. Ennico, chairman of the capital management unit and executive vice president of First American Trust. Mr. Ennico joined the company in November.
Until this year, First American Capital Management, First American's investment management subsidiary, existed solely to manage assets held by First American Trust.
First American Trust was founded in the 1960s to look after the assets of the descendents of First American's founders. It now holds about $1.8 billion of assets for wealthy families and foundations, including the Boy Scouts of America.
First American Capital Management, which was part of the trust company until 1995, manages about $1.2 billion of that. The trust manages the other $600 million in short-term investment funds that hold the proceeds of real estate sales pending the seller's purchase of a new property.
Mark A. Hoppe, president of First American Capital Management, was hired in October from First Security Van Kasper, where he had been vice president of investments. He is now hiring two institutional salespeople, he said, and in the next quarter he plans to broaden the unit's investment strategies.
Most of the company's current portfolios are a blend of large-cap, blue-chip stock, and short-term government paper. Mr. Hoppe said that he wants to incorporate small-cap and fixed-income investment strategies.
First American Corp. has more than 30 subsidiaries, businesses ranging from aircraft title insurance to employment background-check services. Mr. Ennico said he hopes the subsidiaries can exchange customer databases to boost cross-selling.
First American Capital Management is also working on providing online trading to its customers through Pacific American Securities, a San Diego broker-dealer in which the investment unit has a 38% stake, Mr. Ennico said.
In addition, First American has a thrift subsidiary, First Security Thrift, that does mainly commercial lending, and First American Trust recently received a federal savings bank charter. Mr. Ennico said that First American is still deciding what banking activities those subsidiaries will engage in.
Mr. Hoppe said he has no idea why First American has taken so long to do something with its asset management business. Over the five years that ended June 30, he said, its stock portfolio has beaten the Standard & Poor's 500 by 400 basis points.
"It's done well, but nobody knows about it," Mr. Hoppe said.
He said he realizes that drumming up outside business will be difficult. He hopes that the First American name - which is well known in California, though for real estate - will give the capital management unit credibility, and that cross-selling among First American subsidiaries will add to the company's assets under management.
"There's so much potential for cross-selling in this company, I would have a department for cross-selling if I were in charge," he said.
From Our Archive: