Money managers see dramatic rise in assets.

Capital now in mutual funds rivals that in banks

Still riding the tide of investor infusions into the mutual fund industry, downtown Los Angeles-based Capital Research & Management Co. fund manager enjoyed a surge in assets in 1995 to $112.6 billion, up 8.9 percent from last year, according to The List of largest money management firms in Los Angeles County (see opposite page).

The huge scale of Capital Research underlines a fact about Los Angeles, and the nation's, financial industries: The amounts of capital now in mutual funds rivals those in banks.

Capital Research, for example, has double the assets of First Interstate Bancorp, the largest bank based in Los Angeles.

Contrast today's statistics with 1988, when First Interstate had assets of $58.1 billion compared with Capital Research's assets of $20.1 billion.

There is, of course, a big difference between banks and mutual funds: Historically, banks have been lenders to the business community, helping to propel regional growth and economic development.

Mutual funds, in sharp contrast, tend to be almost inert economically, investing primarily in corporate bonds and stock. When a mutual fund buys 100,000 shares of IBM, it is not an investment - no new plant or equipment is bought or installed. Thus, Capital Research's huge pile of assets is of almost no value to Los Angeles.

TCW hikes assets

Second-largest money manager on The List this year is TCW Group Inc., with $48.3 billion in assets, up slightly from last year. TCW has been troubled of late by defections of top-ranking fund managers, including Howard Marx, top gun on high-yield bonds and former chief investment officer.

The third-largest manager on The List is Capital Guardian Trust Co., a sister company to Capital Research. The latter company services institutional accounts, the former individual investors.

Interestingly, in 1987 institutional manager Capital Guardian was a larger manager than mutual fund shop Capital Research, but since then the flood of individual investors into mutual funds has boosted Capital Research's asset size dramatically.

Still, perhaps reflecting years gone by, the institutional managers - that is, Capital Guardian - are on higher floors in the 333 S. Hope St. tower (the old Security Pacific headquarters) than the more-plebian mutual fund managers.

Another oddity: Although the Capital Research mutual fund managers now husband far vaster sums of money than do the Capital Guardian institutional managers, the latter still has more researchers, by 138 to 104.

Transamerica advances

The top three management firms this year are the same as last year, with no changes in order.

New in the No. 4 spot (up from No. 5) is Transamerica Investment Services Inc., with $25.9 billion under management. Transamerica's assets actually contracted this year from last, but other firms have been dropped off The List due to a change in qualifying criteria. Only money management firms with headquarters in Los Angeles County qualified this year, thus eliminating such firms as The Boston Co., which has offices in downtown Los Angeles.

The fifth-largest manager this year is Pasadena-based First Quadrant Corp., with a hefty $16.5 billion under its wings. Also hefty is the price of admission to First Quadrant's client ranks: The manager has a whopping minimum account size of $50 million, the largest minimum in the county, and double what any other manager requires.

As with Transamerica, many management firms on The List are smaller this year than last. For example, Roger Engemann & Associates this year posted in at $3.5 billion in assets, off $700 million from the year before, and downtown Los Angeles-based Northern Trust Bank, with $5 billion under management, is off $500 million from last year's reading.

The region's largest money management firms tend to be geographically clustered in downtown Los Angeles, Pasadena or the Westside.