After spending the past three years rebuilding and restructuring, the chief executive officer of National City Corp.'s asset management unit says he is prepared for strong growth this year, organically and perhaps by acquiring an alternative investment firm.
John G. Abunassar, the chief executive officer of Allegiant Asset Management Co., said in an interview last week that the Cleveland unit has changed "dramatically" in the past three years from one with all of its investment professionals in one location to a multiboutique structure with investment professionals in five cities.
The new structure has given Allegiant more flexibility, Mr. Abunassar said. Last year it increased its assets under management 10.6%, to $29.1 billion.
"We have positioned ourselves and built a solid foundation from which we can now grow," he said. "We have now built ourselves to be a multiproduct firm that can deliver through multiple channels so we can thrive in any market environment."
Some Allegiant operations, including trading, client services, and sales, are still centralized in its Cleveland office, but it manages investment portfolios from five different cities, Mr. Abunassar said.
Its large-cap value portfolio is managed in West Palm Beach, Fla.; its large-cap growth and large-cap core portfolios are managed by teams in Pittsburgh; its fundamental small-cap core portfolio is managed in St. Louis; its quantitative structured products are managed by a team in Chicago; and its fixed-income, midcap value, and international growth portfolios are managed in Cleveland. A team in Chicago launched a 130/30 portfolio in December, he said, and Allegiant hopes to introduce a small-cap international portfolio next year.
The unit wants to continue to diversify its products, said Mr. Abunassar, who was promoted in December 2005 to succeed Ted M. Parker, who was named the president and CEO of Nat City's Michigan operations.
"We feel great about the capabilities we have on the long-only equity side and with fixed income, but we'd love to add some alternative products," Mr. Abunassar said. "We are interested in researching and identifying folks or boutique firms that run nontraditional asset classes such as funds of funds or hedge funds."
He said he has not identified a specific type of alternative investment firm he hopes to buy. "We are really indifferent to geographic locations," Mr. Abunassar said. "We want to be sure that anything we acquire strategically fits and culturally fits with what we have built at Allegiant. … We want to take advantage of what the market brings us."
Many banks have stopped managing proprietary products in favor of an open architecture. Mr. Abunassar said Nat City is applying both techniques — it has adopted an open architecture, and Allegiant must compete to remain on the parent's shelf.
"The folks at National City have our funds on their menu, but we have to earn a position in a client's portfolio," he said. "We are amongst a large menu of mutual fund options available in the branches."
Allegiant has spent the past three years distancing itself from the parent in order to generate outside sales. In June 2005 the Cleveland parent company rebranded its asset management units as Allegiant to stimulate sales.
Nat City's Armada Funds were renamed Allegiant Funds; National City Investment Management Co., the funds' investment adviser, became Allegiant Asset Management Co.; and the institutional asset management business adopted the name Allegiant Institutional Services.
Mr. Abunassar said at the time that Nat City was making use of the name it inherited in April 2004 when it bought Allegiant Bancorp of St. Louis because "Allegiant" was preferred over "National City" by investors.
Initially, analysts said that Nat City was preparing to sell the fund unit to cut costs and move to an open architecture strategy, but Mr. Abunassar said last week that the parent did not plan to get out of proprietary fund management. The Allegiant Funds were "stable" last year as assets under management increased 8.3%, to $13 billion.
"We are comfortable earning our way into an individual investor's portfolio, whether they are a National City customer or a customer with another firm," Mr. Abunassar said.
Allegiant makes 90% of its sales through institutional investors, Mr. Abunassar said. Its products also are distributed through advisers, National City Bank, and through Allegiant's sales force of third-party wholesalers.
"National City is committed to investing in the asset management business, and we are committed to expanding," he said. "We don't have a targeted amount of assets under management we are looking to reach, but we are confident that with our strategy, we can expand."
