Comerica's Spinoff of Money Manager Underlines Barriers Faced by Banks

By Crockett, Barton | American Banker, November 8, 1994 | Go to article overview

Comerica's Spinoff of Money Manager Underlines Barriers Faced by Banks


Crockett, Barton, American Banker


Comerica Inc.'s planned spinoff of a major piece of its money management operation is shaping up as a pointed reminder of a big barrier to banks' ambitions in the investment business.

To attract talented money managers, retail investment sellers, and investment bankers, experts say, banks must be willing to embrace big-figure compensation schemes.

Yet the prospect of creating a new echelon of highly paid investment specialists is at odds with banks' traditionally spend-thrift ways. Many banks are believed to have difficulty stomaching the change.

Comerica, with its announcement last week that it is handing two money management units to a privately held firm, has acknowledged that it was one of them.

"To us this represents a great way to build the business to a level we couldn't build under the other structure," said Comerica executive vice president George C. Eshelman.

Under the agreement, Comerica will transfer two subsidiaries -- Woodbridge Capital Management and World Asset Management -- to Munder Capital Management, Birmingham, Mich.

The combined entity, with $30 billion in assets, will rank among the 75 largest money managers in the country, with about 150 employees. In return, Comerica will get an undisclosed minority stake in Munder Capital, which will be led by its founder and current chief executive, Lee Munder.

The deal is subject to regulatory approval, which is expected by yearend. The transaction is not expected to have a material impact on Comerica's earnings in the near term, though officials hope it pays dividends in the long term.

One of the main benefits for Comerica is climbing into bed with a formidable competitor in the asset management business, Mr. Eshelman said.

Munder has proved remarkably adept at attracting assets since its founding in 1985, and now has more than $8 billion of assets under management.

By no means is Comerica a slouch at managing money. The two units it is handing over to Munder have a combined $22 billion of assets, including Comerica's $4.6 billion-asset family of proprietary mutual funds.

Mr. Eshelman said that Comerica's investment advisory revenues are in the "high teens" of millions of dollars annually.

But he added that Comerica's investment management business has been growing at only a "mid-single-digit pace over the past couple of years," in reference to the yearly percentage increase in revenues. …

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