Despite the financial services industry's downsizing, New York Life Investments is building up a sales force to target the defined contribution market.
The unit of New York Life Insurance Co. says it plans to hire a regional sales staff — three regional vice presidents and an internal sales representative — in the next few weeks for its defined contribution investment-only business.
The sales team's expansion, along with the introduction of two products targeted to the defined contribution investment-only market, could lift New York Life Investments' assets under management, said Jeff Keller, managing director of its defined contribution investment-only group. Assets could grow from $2.3 billion to $5 billion by the end of 2012, he said. "The New York Life story has never played to the market any better," he said. "The strength and stability story that is New York Life has never been truer."
Keller cited the parent's strong credit ratings and its long history as advantages in the current market. And the "absolutely fabulous hiring market," courtesy of the recession, was another argument for building the business now, he said.
The expanded sales force will be expected to sell the company's MainStay mutual funds to advisers, brokers, plan sponsors and consultants. It is also expected to start promoting two stable-value investment vehicles from New York Life.
The company's defined contribution investment-only group, founded five years ago, consists of three professionals in Parsippany, N.J. The team has succeeded in getting New York Life Investments on the major record keeping platforms. The newly hired people will target plan sponsors and intermediaries, Keller said.
In the investment-only part of the defined contribution business, asset managers sell their services through the platforms of nonaffiliated record keepers. Their targets: 401(k) and other defined contribution plans that include offerings from multiple asset managers.
The defined contribution investment-only market is growing quickly. It had about $1.6 trillion of assets at the end of last year, according to Financial Research Corp. in Boston, which projects that total will grow to $2.5 trillion by 2014. The defined contribution market overall had $3.4 trillion of assets under management at the end of 2008, the firm said.
Another good reason to be in the defined contribution investment-only business is its apparent resilience. In a June report, asset managers from the sector who participated in an FRC survey said they had seen just a 16% decline in assets under management in 2008. Participant inertia and systematic payroll deductions helped offset market losses, according to the report.
"In the past 12 months, [the defined contribution investment-only market] has been a great environment to be in if you have mandates," said Luis Fleites, a vice president and director of retirement market research at Financial Research Corp.
Observers have also said that part of the defined contribution investment-only market's attraction for asset managers is that it may be a way to win rollover assets when participants retire.
New York Life Investments is largely counting on its MainStay funds to help it wedge deeper into the market. MainStay, which has 46 portfolios, has been expanded through recent acquisitions. In June, it bought Mariner Municipal Managers LLC in Princeton, N.J., a municipal bond manager that had $377 million of assets under management. The next month, MainStay announced that it had bought four equity funds managed by Epoch Investment Partners of New York.
"MainStay mutual funds have never been stronger and never had a broader array of products that are perfect fits for the defined contribution industry," Keller said. "We have eight or nine funds that fit well in 401(k) plans."
And New York Life will soon offer two stable-value funds to fill what Keller described as a growing demand for choice in that category. Stable-value funds have usually been supplied by plan record keepers alone, he said, but New York Life is counting on its strong credit rating to help its stable-value funds edge out others.
One product, the New York Life Anchor Account, is sold only through bundled retirement plan services but soon will be offered as a stand-alone fund, he said.
The other is under development, a spokeswoman said.