TCW's veteran money managers consider cashing out.

The mammoth Trust Co. of the West could be on the selling block. And befitting the Los Angeles money management firm's ever-secretive ways, no one is talking about it.

In a letter to clients, TCW founder Robert Day, owner of 35 percent of the company's closely held stock, said he is considering numerous options, including an acquisition, merger or public stock offering.

Company officials did not comment on the letter. But word of a possible deal or restructuring had Wall Street furiously speculating about what Day and the firm's senior executives - many of whom are in their mid-to-late-50s - have in mind.

TCW manages more than $50 billion in pension money and mutual funds. And in spite of a tough few years, it maintains an excellent reputation in industry circles. TCW may be best known to Angelenos for its gold-lettered sign atop its tower on South Figueroa Street in downtown Los Angeles, in which the firm rents the top floors.

Given the sky-high values for financial firms, now could be a good time to sell out. Between TCW's assets, revenues and net income, the firm's sale price could fall in the $500 million-to-$1 billion range, according to knowledgeable observers. That's based on an established formula of 1 to 2 percent of the company's assets under management.

Dan Genter, chief executive of West Los Angeles-based RNC Capital Management Co., a money management company, said he had lunch recently with a senior member of TCW.

"He said, 'It's hard for an old man like me to look at the multiples (sales prices) on money funds, and not salivate,'" Genter said. "A number of the senior managers are looking for liquidity. As they approach retirement, they want an exit strategy."

TCW shareholders would probably fare better if the company were sold on the open market, said some industry observers.

"Right now, if you leave the firm, they would buy back the stock at book value. But the market value would be far higher," said one Wall Street source.

Yet one insider said that, while Day may have tired of the chase, he doesn't need the money.

"He never ran TCW for the money. (He ran it) because he enjoyed it, and it was a platform to be a mover and shaker," said the source. "But it hasn't been fun for the last two years. They were heavy into Mexico, and the peso collapsed. They lost their high-yield bond managers, and in 1995 they underperformed the market (in equities)."

Howard Marks, TCW's top high-yield bond manager, left the firm in April 1995 to start his own shop, in what was reportedly a bitter parting.

In the last two years, TCW has remained steady with about $50 billion under management, while other money managers reported huge inflows.

Yet all observers agreed that TCW is not being forced into a sale for a lack of profits.

"At their size, it would be hard not to make money. Your fixed costs are the same, even as assets (and income) rise. They are well past the size necessary to be profitable," said one source.

Still, in his letter to clients, Day wrote of the need to merge to achieve a larger size. In general, there has been consolidation in the money management industry, as exemplified by the recent merger of the Franklin Funds with the Templeton Group, both large and well-known mutual fund managers.

A recent report from New York brokerage Goldman, Sachs & Co. suggested that $100 billion in assets is necessary for a money manager to offer a broad enough range of products, and to have the marketing heft to be competitive.

Still, some downplayed the notion that size matters all that much in money managing.

"I tell you one thing, Bob Day is a smart guy, and he doesn't believe that (size is necessary) for one minute," said Roger Engemann, of the $5 billion-in-assets firm bearing his name in Pasadena. "He's selling now because the price is right."

There are literally dozens of smaller money shops in Los Angeles alone, and most are prospering, noted Engemann.

Most industry observers said the money funds are now selling for about eight to 10 times pre-tax earnings, very high by historic standards. As a private company, TCW has not released its financials.

Ken Moelis, managing director at brokerage Donaldson Lufkin Jenrette's Century City offices, confirmed that multiples are high in mergers or buyouts in financial services.

"Well, of course, right now, it's hard to find an industry where the multiples aren't high. This is a great bull market. This is a very active market," he said. "It is a great time to sell."

In town, the only merger partners large enough to catapult TCW into the $100-billion range are its downtown rivals, Capital Research & Management Co. ($170 billion under management, according to spokesman Victor Sidhu), or Capital Guardian Trust Co. ($52 billion under management), both part of the Capital Group Inc. empire.

But few observers thought such a merger likely. "They have completely different cultures. Capital Group is a consensus, collegial type of place, while TCW is a star system," said one money manager.

TCW, generally speaking, services large institutional investors and pension funds. In recent years, it has managed mutual funds for big New York brokerage Dean Witter.