Many of the biggest and most influential U.S. asset management companies, including Merrill Lynch & Co., Morgan Stanley Dean Witter & Co. and Putnam Investments, are gearing up to launch Internet-based efforts to cater to the booming institutional investor marketplace.
With these companies pouring tens of millions of dollars into portal launches, Web marketing sites, private communication links and site enhancements such as streaming audio and video content, institutional investor consultants and executives are betting the industry will be changed forever.
"It's an area that hasn't been tapped into yet," said John Payne, an analyst with Cerulli Associates, a Boston-based financial services consulting company.
Spurring the surge in build-outs are the needs to satisfy customer demands, to dramatically increase marketing reach and to decrease labor costs. "Asset managers can talk to [institutional investors] without needing to make 20 phone calls," Mr. Payne said.
Institutional investor customers include pension plans, domestic and international governments, and endowments that often have billions of dollars in assets.
The high-end, sometimes-clubby world of institutional investors is not a prime target for banner ads and Internet sponsorships, which have dominated most Web-based consumer marketing campaigns by financial services companies. Accordingly, asset managers are concentrating on Web content in their marketing efforts.
For example, New York-based financial services powerhouse Merrill Lynch & Co., which has about $260 billion in institutional assets under management, later this year plans to launch an institutional investor portal with the working name Direct Markets Online. The venue will aggregate all Merrill's institutional offerings, including the company's Liquidity Management System, under one Internet roof.
The portal will significantly help institutional marketing for the company, said Michael Packer, managing director-corporate and institutional client group Direct Markets, which is Merrill's institutional electronic-commerce unit. "We can send one message about our intent," he said.
Customer demand for aggregation has been a driving factor in Merrill Lynch's launch of a portal. "Clients want to see their business as part of an overall relationship" with Merrill, Mr. Packer said.
Over the coming year, Merrill will further customize portal content to increase marketing and customer service, he said, adding, "It's targeted marketing in a gradual one-on-one scenario."
Merrill Lynch is developing its portal with assistance from several Web heavyweights, including Microsoft Corp., Redmond, Wash., and Cisco Systems, San Jose, Calif. Mr. Packer, declining to reveal budgets for the portal project, said, "It's a substantial sum."
Stanley sounds out
Meanwhile, Morgan Stanley institutional division MSDW Investment Management Group, New York, will likely introduce Internet audio content over the next few months, said Eileen Barron, principal-electronic commerce.
The company, which has $165 billion in institutional assets under management, is also considering delivering customized content to its institutional customers over ClientLink, the company's private customer Internet communication link. Currently, MSDW Investment Management mainly offers research, which is not necessarily customized, over ClientLink.
"Becoming transparent improves our level of client service and is our most important goal now," said Ms. Barron.
MSDW Investment Management's audio rollouts, which may be customized for clients, are meant to improve customer intimacy. Internet audio "creates immediacy and personalizes our message," Ms. Barron said.
MSDW is making most of the changes with its in-house technology team, and Ms. Barron said she could not disclose costs.
Ruth Hughes-Guden, principal in charge of MSDW Investment Management's institutional defined-contribution business, said the company also will significantly build up marketing content for plan sponsors in the next few months. She said she could not provide details, citing early planning stages.
"Our first step was to get [the defined-contribution site] up and running," she said. "Now we want to incorporate our message."
Plan sponsors are the companies or government agencies that maintain retirement programs for plan participants, or employees.
Privacy with Putnam
Boston-based Putnam Investments unit Putnam Institutional plans to introduce a new institutional Web site with features such as streaming video and audio content within the next year. The venue will include a password-protected private link that will allow Putnam to communicate with its institutional clients, said Jane Wolfson, senior VP-institutional and defined-contribution business.
Putnam Institutional, which has $82 billion in institutional assets under management, also plans to roll out a new marketing site for its defined-contribution business.
The site, which will go live later this fall, will provide marketing and educational content for prospective and current clients, Ms. Wolfson said. Fund performance information, Putnam investment philosophies and defined-contribution industry news will be included.
Putnam is building the site internally, and Ms. Wolfson said she could not disclose costs.
Online State Street
State Street Corp. institutional subsidiary State Street Global Advisors, Boston, within the next quarter will introduce Internet-based, private client-communication links for pension consultants, said Pete Bennett, principal.
Pension consultants exercise tremendous power in the institutional investor industry, advising pension plans on how they should invest their money and on which asset manager they should choose.
State Street Global Advisors, which has nearly $500 billion in institutional and retail assets under management, will offer consultants product information, including fund performance, and client reports.
State Street Global Advisors is making the enhancements largely in-house, Mr. Bennet said, declining to reveal exact costs. "It costs north of $1 million on some of these things and with globalization it only increases," he added.
Other big asset managers are taking Internet marketing approaches that are intended to serve as cyberspace marketing pitches for their institutional offerings. For example, AIM Management Group, Houston, plans to launch a portal in the next six months designed for marketing the company's services to institutional investors.
Mike Rome, senior VP-institutional marketing manager for AIM Fund Management's institutional group, said the company's institutional portal will include regularly updated market commentary. For example, the site may contain information on U.S. Federal Reserve Chairman Alan Greenspan's latest speech, Mr. Rome said.
The portal will also allow AIM to tell institutional investors how it is reacting to market activity, said David Bachert, product quality supervisor. This will allow the company to quickly relay its marketing messages, Mr. Rome added.
Some asset managers, meanwhile, are planning their first forays into Web marketing with institutional sites geared toward giving customers expansive information on products and services.
Templeton Investment Counsel, Fort Lauderdale, Fla., was launching its first institutional investor Web site as Business Marketing went to press. The venue is intended to serve in part as a marketing post that will offer information about the company's institutional funds and sales forces, said Denman Zirkle, exec VP-institutional marketing.
Still other asset managers think the best way to market themselves over the Internet to institutional investors is by building up site functionality. For example, New York-based Deutsche Banc Alex. Brown within the next quarter will introduce an Internet feature that allows institutional investors to get an independent evaluation of the portfolio Deutsche is managing for them, said Matthew Carrara, managing director-institutional equity derivatives.
Deutsche Banc Alex. Brown's parent, Frankfurt-based Deutsche Bank, has more than $875 billion in assets under management. Deutsche is considering a global print campaign to accompany the rollout, Mr. Carrara said.
While the asset managers either declined or could not supply Web budgets, Dan Latimore, director of eStrategy at Cambridge, Mass.-based consulting firm Mainspring Communications, said asset managers are spending huge sums--"in many cases, in the eight-figure range."
Other institutional investor consultants said asset managers' deep pockets have allowed them to hire and keep a lot of top-rate Web development talent in-house.
"Business is driving the technology," said Radu Pasovschi, a Putnam Investments vet and current senior VP for Radnet, a Wakefield, Mass.-based Internet developer for asset managers.
Still, some industry consultants expect the longstanding, hands-on, asset manager marketing approach will die hard. The attention "institutional customers typically demand cannot be easily provided over the Internet," Mr. Latimore said. "But information transparency and transmission will become easier and cheaper."