In the wake of J.P. Morgan Chase & Co.'s purchase of Bank One Corp., executives at American Century Investments are confident their fund company will be able to grab new business and other opportunities as it offers its products and services throughout the now bigger bank.
"We want to work into their network deeper," said David Larrabee, a senior vice president at American Century who oversees wholesale distribution. "When you add Bank One to the wholesaling we are doing with Morgan Chase, we think we can develop opportunities extensively."
The Kansas City, Mo., fund company has had a relationship with J.P. Morgan Chase since 1998 when the bank bought a 45% stake in it. Since then, the companies have started a joint venture, J.P. Morgan/American Century Retirement Plan Services, which the banking company bought in June 2003.
About $10.5 billion of American Century's $90.5 billion of assets under management were sold through J.P. Morgan Chase, Mr. Larrabee said. He added that he expects the Chase-sold asset volume to grow as American Century develops relationships with the former Bank One's retail and private banking customers.
Cindy Gerhard, a managing director at J.P. Morgan Chase responsible for distributing third-party products through the bank's channels, said that as distribution expands the bigger scale will present opportunities for the fund companies with which it has relationships. Before the merger, she said, J.P. Morgan Chase had 500 branches. Post-merger, it has 1,800.
"American Century is active in the retail channel today, and they have worked hard with that group, and I have every reason to believe that that will continue," she said.
American Century offers its mutual funds, 401(k) products, and 529 college savings plans through J.P. Morgan Chase's branch network and its private bank.
It also is educating brokers in the former Bank One branches about its products and expects to be available through the former Chicago company's private bank by early next year.
"There is a great opportunity through a lot of different channels," Mr. Larrabee said. "There are retail customers, and there are higher-net-worth individuals that we have never had the opportunity to sell our products to before that will be introduced to what we can do."
Ms. Gerhard said one new opportunity for American Century stems from the different customer profiles at the bank-merger partners.
Before the banking companies merged J.P. Morgan Chase focused its retirement services business on large corporations, she said, and its private banking business on people with more than $25 million of assets. But Bank One took more of a mid-tier approach, she said, and the post-merger bank will be able to go after middle-market businesses and high-net-worth investors with $1 million to $25 million of assets.
Kevin Daniels, an analyst at Daniels & Associates in Boston, said, however, that American Century would be slowly but steadily squeezed out as the two banks' proprietary fund units are integrated. When the melding of JPMorgan Funds and the One Group of mutual funds is completed in February, they said, the resulting fund unit will be the fifth-largest mutual fund company in the country, with $210 billion of assets under management.
Ms. Gerhard said, though, that American Century's products and services will have room in the post-merger bank even after the integration of the proprietary fund units.
"The strength of the two fund companies is that they are both a powerhouse in money market funds. Bank One has excelled in managing core bond funds, and J.P. Morgan has outstanding U.S. equity management and core fixed-income products," she said. "But American Century is organized around growth management and value management products. Those are unique investment engines to what we have here. I would never look at them and say there isn't room for their products here."
Geoffrey Bobroff, an analyst at Bobroff Consulting in East Greenwich, R.I., agreed that there are opportunities for American Century to develop assets because of the merger.
"Bank One has a broader footprint and broader retail distribution potential than Morgan Chase ever did," he said.
"There is always room for a nonproprietary firm like American Century even in a large organization like this. I don't know that any institution has had any success in offering just proprietary products," he said.
American Century has been working hard since 1990 to develop sales through third-party channels. In 1990, 12.5% of its $8 billion of assets had been sold through intermediaries and third parties. Today, 53% of its assets are sold through financial services intermediaries.
Brian Jeter, a senior vice president at American Century who oversees third-party distribution, said this growth is not accidental. In the past four or five years, he said, the company has been developing products and expanding its wholesaling staff to increase third-party sales.
The fund company has 175 people on its wholesaling staff, Mr. Jeter said. Since February, the company has increased its wholesaler roster - the people who actually go out and sell products - from 11 to 23, and it expects to add four by yearend. Mr. Jeter said American Century will have 32 wholesalers by March 31.
"We are building up our sales effort," he said. "By the end of the year, we'll have a family of 17 load products, and we are developing a strong array of Advisor Funds."
Last month, American Century made three Strategic Asset Allocation portfolios available only through financial advisers in order to broaden its products' availability to third-party providers. It also started a family of five no-load funds for advisers.
"In the third-party market we have had a traditional core strength in the insurance marketplace and through 401(k) plans," Mr. Jeter said.
"We have a big presence with J.P. Morgan Chase, Schwab, Nationwide, American Express, and AIG. Those are strong, long-term relationships, and we are looking out for newer opportunities and ways to add to our core distribution network," he said.
"We think there is going to be big growth for us going forward," he added, "but we are only halfway through the ballgame."
