U.S. Bancorp Asset Management's chief investment officer said he expects the firm to double its assets under management over the next five years despite its slow growth in flat market conditions since its parent's 2001 megamerger with Firstar Corp.
"Our aspiration is to double our size over the next five years," said Mark S. Jordahl. "It is a stretch goal, but we are all about setting stretch goals in each of our business units. We expect 15% compounded growth. Given our products, our investment capacity, and increased distribution, it is attainable."
The Minneapolis company, which had $119 billion of assets under management at Sept. 30, has only increased its assets under management by $6 billion since February 2001 when Firstar, a Milwaukee regional banking company, bought the old U.S. Bancorp and took its name. In October 2001, the Firstar Funds family was rolled into U.S. Bancorp's First American Funds, making the unit the fifth-largest bank-run mutual fund family in the United States.
Analysts said they are skeptical of U.S. Bancorp's lofty expectations. Geoffrey Bobroff, an analyst at Bobroff Consulting in East Greenwich, R.I., said few fund companies other than American Funds, an independent company, can expect to double assets under management during the next five years.
"It is hard to see how they can achieve this kind of growth," Mr. Bobroff said. "I am not saying that they can't, but it seems it'll be a challenge given an environment where we have seen substantial decline in growth patterns over the past three to four years. That type of growth is not in the normal thinking of people following the industry."
Mr. Jordahl said U.S. Bancorp Asset Management has spent the past three years putting the two fund families together and gearing up for this push. Portfolios with similar characteristics were merged to reduce the fund roster from 86 to 40, he said.
The portfolio manager compensation system, previously based on assets managed or the number of accounts, has been changed to reward those whose funds outperform specific benchmarks, including the Dow and the S&P 500.
To grow from here, Mr. Jordahl said, the unit will focus on expanding distribution in its parent's footprint. He said asset growth has come from selling to the parent's banking customers but that now the unit must grow beyond that base. Part of this effort is a push to recruit institutional customers.
"Today, we really are about two things, investment performance and satisfying our clients - and doing that leads to long-term growth for our company," he said.
To grow beyond the bank channel, Mr. Jordahl said, his unit will increase its marketing and advertising.
Chelle Gonzo, the unit's marketing director, said it will not increase its marketing or advertising budget or launch a national ad campaign but father focus on cities where it has already developed business. The roster includes Minneapolis; Milwaukee; Madison, Wis.; Cincinnati; St. Louis; Denver; Portland, Ore.; and Seattle, she said.
"We really want to work on developing a brand presence in those markets," she said. The asset management unit will do very little advertising to develop the brand, though, she said.
U.S. Bancorp Asset Management will develop more personal relationships by spending its marketing budget on creating brand awareness through financial professionals and sponsoring events. "Our strategy going forward is to put more emphasis on local advertising than we have done," she said. "We have been specialized on events and meetings and building locally."
Mr. Jordahl said the unit plans to expand through third-party distributors and directly through institutional investors.
"We are spending time working with institutional consultants telling our story, and that can be a lengthy sales process," he said. "But we are getting these consultants comfortable with us. We are making strides there. The institutional business is a huge opportunity for us."
"Clearly, within the bank's footprint we have a reputation," he added. "Now it is a matter of extending that."
Mr. Bobroff said U.S. Bancorp's fortunes will depend heavily on market conditions. If the economy improves after the election, he said, a growth opportunity may appear, but this scenario is dependent on a lot of "ifs."
"Investments are at a saturation point in the American household, so unless someone has something different and novel from a product or marketing standpoint, growth will be a challenge," he said. "Growth is going to be very difficult for now."
