Investing November 5, 2001

Stock Funds Bounce Back In October

November 5, 2001 (PLANSPONSOR.com) - Diversified US equity funds rebounded in October, gaining 3.8% on average after a 17.8% plunge in the third quarter, according to Lipper.
Reported by

However, the category, which represents about two-thirds of US fund assets, is still down 19.4% year-to-date, the worst performance since 1974.

Value funds continued to outpace growth strategies for the year, gaining 3.9% in October and up 3.1% in 2001. That performance is second only to gold funds, which are up 13.6%.

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Small-cap growth stock funds were lifted by technology stocks, gaining 8% during the month. Large cap growth funds rose 4% during the month but are down nearly 30% year-to-date, while mid-cap growth funds gained 6.7% for the month, trimming their year-to-date losses to about 30%.

Science and technology funds jumped 16.6% but are still down an average 46.3% year to date.

Health and biotech funds cut their 2001 losses to 17.4%, thanks to a 5.4% increase during the month, while natural resources funds gained 8% in October, reducing year-to-date declines to 14.6%.

Sector funds rose 6.3% for the month, while world equity funds gained 3.4% on average, cutting year-to-date losses to 23.3%.

Administration November 4, 2001

SG to Buy Majority Stake in TCW

April 11, 2001 (PLANSPONSOR.com) - France's Societe Generale SA has agreed to buy 51% of TCW, parent of Trust Co. of the West, the latest European acquisition of a US asset management firm.
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Los Angeles based TCW has roughly $80 billion in assets under management, with roughly $34 billion each in US stock and bond funds, and about $5 billion each in alternative and international investments. 

The TCW deal is the latest in a string of trans-Atlantic combinations that began last year (see Europeans Buy More American Funds ).

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The deal follows a late March acknowledgment (see NewsDash Daily Roundup –  March 30 ) that the two firms were discussing a “possible alliance” that would include “marketing and cross-selling Societe Generale Asset Management products in the US and TCW products in Europe.”

Currently valued at $880 million, Societe Generale said that the agreement includes a clause allowing for the initial purchase price to be increased if TCW’s profits in 2001 and 2002 beat current expectations.

Societe Generale will pay for the stake with 14.1 million of its own shares, giving TCW shareholders a 3.33% stake in the bank.

Looking ahead

Over the next five years, the French financial giant then plans to boost its stake to about 70% in four equal installments, and could wind up paying an additional $1.6 billion for that stake. 

However, the value could fluctuate over time since the transaction is structured with an “earn out” provision that adjusts the value of the back end of the deal depending on the performance of TCW.

The deal calls for employees of closely held TCW to continue to own 30% of the money-management firm.

TCW and its portfolio managers are expected to retain considerable autonomy after the acquisition. Robert A. Day, TCW’s chairman and chief executive, will continue to run TCW with his existing management team, though Societe Generale will add two of its representatives to TCW’s board.

On December 31, TCW’s roster of institutional clients included:

  • Adolph Coors
  • CalSTRS
  • Colorado Public Employees Retirement Association
  • The Duke Endowment
  • The John D. and Catherine T. MacArthur Foundation
  • New York State Common Retirement Fund.
  • General Mills
  • Haliburton
  • Hallmark Cards
  • Michigan State University
  • Pfizer
  • Sprint
  • Xerox

Failed attempt

Societe Generale teamed up with Spain’s Banco Santander Central Hispano SA to try to acquire money manager Fayez Sarofim, but the deal fell apart when Fayez decided not to sell (see Fayez Sarofim Says “No Sale” ). 

Currently, SocGen has a small asset-management business with about $2.1 billion in assets, thanks to its 1998 acquisition of US investment boutique Cowen & Co, according to Dow Jones.

– Nevin Adams   editors@plansponsor.com

For more on the impact of these deals on plan sponsors, see Taming the New Beast .

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