Newton Capital Management Ltd., the London asset management arm of Mellon Financial Corp., announced Wednesday that it had started a U.S. fund, its first, as part of a campaign in the 401(k) market here.
Mark Scott, the head of Newton's institutional business, said in an interview that the company had begun to prepare an expansion into the United States about a year ago. He made a few marketing trips and met with institutional consultants, he said, and realized there is a big opportunity here.
Newton International Equity Fund, the company's first U.S. offering, will be available to retail investors and through 401(k) plans. It is intended to invest mainly in Europe, Australasia, and the Far East, the company said, and has an initial investment of $30 million from the pension fund division and reserves of a U.S. insurer.
Newton expects to accumulate $4 billion of U.S. assets within a few years, Mr. Scott said.
The Mellon unit has hired two executives to handle U.S. sales and services. In January, it added Ciaran Spillane, a former vice president at Bank of Ireland, to head its U.S. business. A second executive, who is to report to Mr. Spillane and help increase U.S. distribution, will join the company next Wednesday.
Mr. Scott said Newton has flirted with the U.S. market for years but now is ready for a "full-fledged" push. It has already been retained by a couple of investments banks to supply services for their wrap programs, he said.
"Those are in the contract stage," he said. "We want to be able to provide products for wealthy investors, institutional investors, and individuals."
The new fund uses the same investment strategy as Newton's separate accounts; it is managed by Paul Butler, the company's global equities investment leader in London. He manages more than $2 billion of the global equity team's $5.1 billion, is chairman of the global equity model group, and belongs to the equity strategy group, macro strategy group, and Newton's investment committee.
Burton Greenwald, an analyst at BJ Greenwald Associates in Philadelphia, said more international investment managers are looking to expand distribution by bringing their products and services to the United States. This is because international funds have outperformed domestic equity products in the past two to three years, he said.
"There is a real demand for these products," he said. "This is a natural outgrowth of the increased interest in international investing."
Mr. Greenwald said Newton would have to work closely with its parent to avoid competing with it for business.
Mr. Scott said Newton is significantly different from its parent. "We differentiate ourselves from other firms," he said. "Our style is different. Our approach is different. While we don't want to step on any toes, we are an independent firm. We don't see ourselves competing with other Mellon firms. We see ourselves competing with all investment firms."
Newton will make its full roster of products and services available in the United States, Mr. Scott said. The company has $50 billion of assets under management and clients worldwide, he said, but the bulk of its investors are in the United Kingdom.
He said Newton believes other opportunities exist to expand globally but perhaps not in such a focused fashion as in the United States. "We want to evolve from sales to service, and we will hire more people as we go," he said. "Hopefully, we will need additional people to service clients and provide day-to-day contact with new investors."
