from expanding services to existing clients and from adding new clients. The greatest challenge for all African American-owned investment banks, says CEO James Reynolds Jr., is convincing clients that we have the ability to manage large, complex assignments, which are typically reserved for longer-standing Wall Street investment banks. It is these types of mandates that are essential to our growth.
Asset Managers: Mixed Results
Assets under management increased by 4.4% for the BE asset managers. Among those on the plus side is RhumbLine Advisers (No. 3 on the BE ASSET MANAGERS list with $15.9 billion in assets under management), based in Boston. The firms assets under management increased by nearly $3.8 billion because of substantial inflows and a healthy stock market. CEO J.D. Nelson notes that nearly $2 billion came from 25 existing clients, with assets mainly in pension funds, endowments, and foundations; the remaining $1.8 billion came from new clients and was invested primarily in the firms index-based stock and bond funds.
Utendahl Capital Management (No. 6 on the BE ASSET MANAGERS list with $2.6 billion in assets under management), which specializes in fixed-income asset management for institutional investors, added about $600 million to its assets under management. Chairman John Utendahl says the firm sold a wider variety of investment productsincluding a money market mutual fund and short duration productsto a greater number of major corporations.
But the year proved far more challenging for Chicago-based Holland Capital Management (No. 9 on the BE ASSET MANAGERS list with $2.2 bil
lion in assets under management), which saw an $800 million decline among its portfolios. Founding partner Louis A. Holland saw institutional investors increasingly choose index funds, rather than actively managed funds, and alternative investments, such as real estate or emerging international markets. But Holland is optimistic: We expect that our conservative growth style will regain favor in the market this year.
Private Equity: Hope and Challenges
Last year, private equity acquisitions of U.S. companies set a record, totaling some $420 billion from $129 billion in 2005, says Matthew Toole, an analyst at Thomson Financial, because of merger and acquisition activity worldwide in the first quarter. Hot sectors include retail, consumer products, energy and power, healthcare, media and entertainment, and high technology. Collective capital under management increased 13.2% for the BE private equity firms. Meanwhile, Toole notes that investors will be watching closely how future deals are financed.
According to Toole, most of the recent private equity deals have been financed by high-yield debt, and the health of the credit market will determine the terms of credit. If interest rates rise and investors require higher coupons (higher interest rates on the bond), it will become more expensive to issue the debt and more difficult for private equity buyers to acquire companies. If that happens, we could see a marked slowdown in private equity acquisitions this year, Toole says.
New York City-based ICV Capital Partners (No. 3 on the BE PRIVATE EQUITY FIRMS list with $440 million in capital under management) is now primed with a second private equity fund