American Century Investments has never been on most advisers' radar screens
American Century Investments has never been on most advisers' radar screens.
But last week's announcement that the firm has hired former Fidelity Investments distribution chief Peter Cieszko to fill a new role as head of intermediary and institutional sales in North America has industry experts predicting that that is about to change.
“This is a strong signal to the market that American Century is making a real commitment to the adviser space,” said Lee Kowarski, a principal at kasina LLC.
The asset management firm first began selling through intermediaries in the 1980s. But it isn't a top-selling fund firm for most financial advisers.
Nevertheless, “the intermediary channel is the most important channel for the company,” said Michael Green, head of global client relationships. “Taking [Mr. Cieszko] on is part of our effort to expand our intermediary business.”
Along with the hiring of Mr. Cieszko, the firm plans eventually to expand its sales force in North America, Mr. Green said.
American Century also is looking at expanding its product line to include more alternatives and international-equity products, two areas in which advisers have shown interest, Mr. Green said.
Ultimately, the firm hopes to raise its brand awareness among advisers. American Century is the 19th-largest fund company in the United States with $80.96 billion in mutual fund assets under management. It is ranked 22nd in terms of brand recognition among advisers, according to kasina and Horsesmouth LLC's 2010 FA Vision survey.
“Ideally, you want your brand recognition to be higher than your asset ranking so that it facilitates more growth,” Mr. Green said.
Thirty-seven percent of the firm's total ssets under management come from intermediaries, making it the asset manager's biggest distribution channel. But unlike many fund companies with specific growth goals for the business, American Century is focused more on creating deeper relationships with financial advisory firms across all channels: wirehouses, independent broker-dealers and registered investment advisers, Mr. Green said.
“Maybe it's because we are a privately held firm, but we focus more on the quality of the relationships rather than pure growth numbers,” he said.
To do this, the firm wants to spend more time with advisers, learning their needs, Mr. Green said.
“The client base in America is changing, both in terms of how distribution works and in the product set, as is the regulatory environment,” he said. “I think it requires someone on the ground in the U.S. with the experience that [Mr. Cieszko] has.”
Mr. Cieszko had been head of Fidelity Investments Institutional Services Co. Inc. for two years before he left in January. He joined Fidelity from Evergreen Investment Management Co. LLC, where he was president and chief executive.
In his new role, Mr. Cieszko will oversee a team of 187 people, including David Larrabee, senior vice president of intermediary sales, and Joe Craven, senior vice president of institutional sales. He will be based in New York and starts his job Aug. 1.
American Century — like many firms that had their roots in equity funds — has had its share of stumbles over the years.
Until the late 1990s, the firm was known for its growth stock funds, but after the dot-com crash, those funds fell out of favor, said Greg Wolper, an analyst at Morningstar Inc.
LOTS OF TURNOVER
The firm also saw a fair share of turnover on the investment side over the past few years.
In 2008, Mark On, chief investment officer of the international equity group, and Tom Telford, manager of the American Century Ultra Fund and American Century Technology Fund, left the firm.
In 2009, Steve Lurito, chief investment officer of U.S. growth equity, left the firm after less than two years. Later that year, Glenn Fogle, CIO of U.S. growth equity, mid- and small-cap, also left, after 19 years.
The firm has addressed the issue of turnover, Mr. Green said.
Mr. Wolper said that over the past few years, things seem to have settled down a bit.
American Century has worked hard to broaden its lineup, he said, and it now offers a full array of fixed-income and equity funds.
“They stick very closely to their style boxes for their equity funds, and that is something that advisers like,” Mr. Wolper said.
American Century's decision to make a more concerted push into the adviser channel follows improvement in its performance over the past few years. Thirty-six percent of its funds performed in the top quartile for the past five years, according to Morningstar.
“American Century has been doing really well for quite some time on the performance side,” said Don Phillips, director of research at Morningstar. “If you want to turn up the heat on your sales efforts, the time to do it is when your numbers are good.”
EQUITY INCOME FUND
One fund that has stood out is American Century's Equity Income Fund, which has been in the top quartile of its category for the past three, five and 10 years, according to Morningstar. The fund brought in $900 million last year, almost half the total $2.3 billion in net flows that the firm saw in all its funds last year, according to Strategic Insight Inc.
And with equity coming back into favor, American Century appears to be in a good position, observers said.
Overall, 2010 was the best year ever in terms of net inflows, Mr. Green said. The firm brought in $6.3 billion and is already ahead of its target this year, he said.
And bringing on someone such as Mr. Cieszko, who has relationships with many of the home offices of major broker-dealers, may be exactly what American Century needs to become a dominant player among advisers, Mr. Phillips said.
“They are going up against firms that have long relationships with the wirehouses,” he said. “[Mr.] Cieszko has an amazing Rolodex and is one of the best in the industry.”
E-mail Jessica Toonkel at jtoonkel@investmentnews.com.
