New York Life Seeks Next Marketfield to Build Kim’s Investments

May 21, 2014 1:54 pm ET

May 21 (Bloomberg) -- New York Life Insurance Co., which built the Marketfield Fund into the largest U.S. alternative mutual fund, is seeking additional offerings that allow clients to bet on more than gains in stocks and bonds.

John Kim, chief investment officer, said policyholder-owned New York Life is seeking to acquire more funds. Among the targets are real-estate funds and managers who move money between countries, asset classes and market sectors, he said.

New York Life’s collection of specialized money managers -- such as ICAP and Cornerstone Capital Management -- has helped assets under management more than double in five years to $521 billion as of March 31, including $179 billion of insurance- company funds. The firm agreed last month to offer energy- focused funds from Cushing Asset Management LP after adding Marketfield in 2012.

“If there are other Marketfields and Cushings of the world out there, we would be interested,” Kim, 53, said in an interview this week in his Manhattan office. “We’re looking to fill out the suite of alternative capabilities even more.”

New York Life, led by Chief Executive Officer Ted Mathas, expanded overseas this year with the acquisition of Dexia SA’s asset manager for more than $500 million. That business, branded Candriam in Europe and Ausbil in Australia, will become a platform for buying up fund managers, Kim said.

“U.S. fund-management organizations have a real opportunity outside the United States over the next decade to build assets,” Burton Greenwald, a mutual-fund consultant, said in an interview. “The U.S. is a very, very mature market.”

Insurers Expand

Principal Financial Group Inc. and MetLife Inc. are among U.S. life insurers using deals to expand in asset management outside the country. Principal said last year that it had spent about $2 billion since 2008 acquiring money managers, including a Chilean pension provider. MetLife acquired Chilean pension firm AFP Provida SA last year.

New York Life will offer some of its funds in Europe, and plans to import funds from the former Dexia business for U.S. investors, Kim said.

The Marketfield Fund, run by Michael Aronstein, had about $2 billion under management when New York Life agreed to add it. Marketfield, which can bet on share declines and use options, now oversees more than $20 billion, making it New York Life’s largest mutual fund.

“You marry up a hot asset class with really strong performance with great distribution, and that’s what happens,” Kim said.

Marketfield Struggles

Marketfield has declined 5.9 percent this year, according to data from Morningstar Inc. Aronstein said in an interview that bets on growth in developed markets were to blame.

“Our performance has not been any good this year,” he said by phone. “The market has indicated that it’s more concerned with the likelihood of weakness.”

Aronstein said he expects the economy to strengthen longer- term. The fund’s biggest picks at the end of March included Alcoa Inc., Facebook Inc. and Bank of Ireland, according to the company’s website.

Still, Marketfield has gained an average of 12 percent over the past five years, according to Morningstar.

“The success of Marketfield has propelled them to the forefront of that particular area of the business, which happens to be the fastest-growing area of the business,” Greenwald said. “That has cast a halo, so to speak, on some of their other products as well.”

Asset Breakdown

About a third of New York Life’s $521 billion portfolio belonged to the life insurer’s general account at the end of March, and $100 billion was invested in mutual funds. At the end of 2008, about two-thirds of New York Life’s $224 billion in assets belonged to the general account.

Kim joined New York Life from Prudential Financial Inc. in 2008 as head of the investing unit, and became chief investment officer in 2011. This year, New York Life named separate CEOs to oversee third-party funds and the insurer’s general accounts, both reporting to Kim.

Kim said New York Life is weighing the acquisition of funds that invest in U.S. real estate, focusing on high-quality properties in major cities. New York Life is taking a cautious approach because the real-estate cycle is getting “long in the tooth,” he said.

“While we’re interested in the asset class strategically, we also know that from a market cycle perspective, that it might be better to wait a little bit,” Kim said. “We’re trying to weigh the strategic need with how we perceive the cyclical position of real estate today.”