Companies have come and gone, stocks have surged and crashed, reputations have soared and sunk. But throughout the past decade, a single name has topped the II 300: Fidelity Investments. The Boston-based institution's total assets of $794 billion at year-end 2002, though down 10 percent from the year before, are still sufficient to put it atop Institutional Investor's annual ranking of America's top 300 money managers. Fidelity's hold on the top slot is all the more impressive in that the firm remains privately held and has made no acquisitions in an industry that is consolidating.
Still, the competition is gaining ground. Big indexers in particular are breathing down Fidelity's neck. Second-ranked State Street Global Advisors is suddenly within striking distance, with $763 billion in assets. Third-place Barclays Global Investors, with assets of $746 billion, is also in position to mount a challenge. Both firms report strong sales not only of index products but also of new active and alternative offerings (see story, page 40).
Meanwhile, the next three enterprises on the list -- Capital Group Cos. (No. 4), Citigroup (No. 5) and Mellon Financial Corp. (No. 6) -- are approaching the $600 billion mark. That milestone has been crossed by only the three firms that sit atop the 2002 rankings.
"There are a few firms out there that in the next few years could very well give Fidelity a run for the money," contends Devereaux Clifford, a consultant with Greenwich Associates in Connecticut. "It could be the big indexers or some global players with a lot of reach, such as Axa or even UBS." (Axa Financial, with $415 billion in assets, is No. 9; UBS Global Asset Management, with $403 billion, is No. 12.)
Fidelity executives are unfazed by all these upstarts. "Not too many firms have been able to combine investment expertise with recordkeeping excellence the way we have," says Robert Reynolds, Fidelity's chief operating officer. "That's mainly because of investments in technology, and we plan on staying ahead of the curve." Last year Fidelity spent $2 billion on technology.
Of course, nobody has invented a device to prevent market bubbles from bursting. U.S. stocks declined for the third consecutive year in 2002, for a cumulative loss since March 2000 of 37 percent. In all, some $7 trillion of stock market wealth has been wiped out, estimates Santa Monica, California-based consultant Wilshire Associates. "I think after what the securities markets have been through the past several years, investor expectations have been scaled way back," says Ronald O'Hanley, head of Mellon Bank's institutional division.
The total assets of the II 300, reflecting capital in- and outflows as well as investment gains and losses, were down a modest 1 percent in 2002, as against a 22 percent swoon for the Standard & Poor's 500 index.
Plainly, there was no easy money to be made. Perhaps that's why so many money managers pursued a market that is deemed to be attractive even in the bleakest economic environments: high-net-worth investors, usually defined as households with at least $1 million in investable assets. On the strength of its success in such private client management, Citigroup moves up three places on the list, from eighth (see table, page 50).
At No. 7, heading in the opposite direction, is J.P. Morgan Fleming Asset Management. Fourth in last year's rankings, the firm suffered mass client defections from its enhanced indexing unit because of severe underperformance. Rounding out the top ten are familiar names in more or less familiar spots: Merrill Lynch Investment Managers at No. 8 (down one step from last year); Axa at No. 9 (holding its ground) and Vanguard Group at No. 10 (up a rung up from 2001).
Some of the more dramatic moves take place lower in the rankings. Deutsche Asset Management -- which last year completed its acquisition of the Scudder, Stevens & Clark unit of Switzerland's Zurich Financial Services -- saw its assets rise from $238 billion in December 2001 to $408 billion a year later, vaulting it from No. 24 to No. 11. BlackRock/PNC, which has been reeling in new accounts amid the flight to bonds, thanks to its fixed-income focus, jumps from No. 20 to No. 16. By contrast, Wellington Management Co., a mutual fund subadvisory specialist that has been hurt by its reliance on retail equity, drops from No. 18 to No. 20. Tumbling out of the top ten is Morgan Stanley Investment Management, which drops four positions to No. 14.
Goldman Sachs Asset Management steps up one notch to No. 18 by increasing its assets by 1 percent, to $309 billion. "No one in the industry can sit back and blame their problems on the stock market," contends David Blood, head of GSAM. "This is the time when strong firms set themselves apart."