| NEW YORK
NEW YORK Jan 6 Financial services firm
Guggenheim Partners has attracted attention recently for its
involvement in high profile deals: it led a group of investors
in buying the Los Angeles Dodgers baseball team and helped
engineer Verizon's $130 billion acquisition of Verizon
But it is the firm's lower-profile asset management division
that has been winning investors' interest of late. The division
has quietly quadrupled its assets under management from $40
billion at the end of 2008 to $164 billion at the end of
September and now represents the lion's share of its parent's
$190 billion in assets under management.
Notably, investors poured more than $4.6 billion into
Guggenheim's signature bond funds and exchange-traded funds in
2013 - the same period when they were draining more than $44
billion out of bond funds from Pacific Investment Management Co
(PIMCO), the firm known for its fixed income expertise,
according to Morningstar data.
Now Guggenheim Partners is looking to Europe to continue
fueling its growth, which may result in additional products for
asset management clients looking to diversify outside of U.S.
fixed income as interest rates are expected to rise.
Guggenheim Partners this month opened a London office
focused on real estate investing and plans to expand its direct
lending to middle market companies in Europe. While both efforts
stem from opportunities the parent company sees to grow outside
of asset management, it could result in products for fund
investors looking for alternatives outside of the U.S.,
Ultimately, Guggenheim wants to boost its profile with
retail investors, which makes up about 25 percent of its
"We used to joke that we were the best kept secret in the
investment management business," Scott Minerd, chief investment
officer of the firm, told Reuters in an interview. "That is what
we are trying to change."
ATYPICAL BOND FUNDS
Guggenheim, with a fixed-income specialty, has won
investors in a challenging bond environment because it
specializes in funds that invest in either niches of the market,
like bank loans, or have the ability to invest across several
fixed income sectors. These funds are believed to better
withstand the rising interest environment the Federal Reserve is
expected to usher in than core fixed income funds.
U.S. investors are expected to move $1 trillion away from
core fixed income strategies into areas like floating-rate
instruments and multi-currency portfolios, according to Casey
Quirk & Associates, a Darien, Connecticut-based consultant to
Guggenheim's most popular bond fund, the Guggenheim Floating
Rate Strategies Fund, attracted $864 million in the
first 11 months of 2013.
Minerd recognizes that Guggenheim shares the challenge that
many fixed income fund managers face today in that the booming
equity markets have grabbed investors' attention.
Though the Guggenheim name might have resonance - the firm
started as a private office managing the fortune of the famous
family that endowed the New York art museum - it doesn't have
the brand power that PIMCO does, nor does it have a talking head
with the star power of PIMCO's co-chief investment officer, Bill
Gross. That could hold the company back.
"Guggenheim has really made a good name for itself on
obscure, off the run sectors," said one former employee who
wished to remain anonymous. "(But) it's hard to commercialize
and in this business you really need a signature product."
Minerd said that the firm's jump in assets under management
is proof, however, that investors are aware of its funds'
While Guggenheim's ambitions in Europe go beyond asset
management, the firm's added capabilities may help that business
Because Guggenheim has its hand in so many different
businesses, ranging from asset management to private equity, it
can build products around these two new businesses as it sees
fit, said Todd Boehly, president of Guggenheim Partners.
So, for example, if there is an opportunity to create a fund
leveraging its real estate investing expertise out of London,
the firm can do so, but it can also bring an investment
opportunity to its private equity clients, he said.
Guggenheim also plans to buy at least some of its growth in
Europe, both in asset management as well as other areas.
So far, the firm has been daunted on at least two deals: It
lost an October bid for Lloyds Bank's fund management arm
Scottish Widows, according to people familiar with the deal.
Aberdeen Asset Management ended up winning that business for 660
million pounds ($1.1 billion). The firm also saw a 2012 deal to
buy Deutsche Bank's AG 's asset management business
for 1.4 billion euros ($1.81 billion) fall apart.
And the European asset management space is becoming
increasingly crowded as more U.S. firms look to grow there,
particularly in the fixed income space, said Yariv Itah, a
partner at Casey Quirk.
But Guggenheim remains undeterred. "I think that a number of
the banks in Europe are going to be under capital pressure and
will be looking to potentially sell their asset management
businesses and I think we will look at them," Minerd said.