Alliance Waits, Patiently, for Chinese Opening
February 26, 2001
Kurt Schoknecht is the CEO and director of Alliance Capital Management International of New York, overseeing the firm's offshore and international businesses. Schoknect recently discussed his career, ACM International's key markets outside the U.S., and the firm's strategies to develop those markets with Mutual Fund Market News reporter, Andrew Greene. An edited account of their conversation follows.
MFMN: What sort of funds does ACM International offer?
Schoknecht: We offer a full family. We have over 20 different mutual fund families and well over 150 different funds if you include all of the share classes. And they run from whatever Alliance is strong in, so large-cap growth funds, a broad array of fixed income, regional, geographic funds, sector funds like technology, healthcare and biotechnology. So it's a full range of funds.
MFMN: Does ACM International have plans to offer new products?
Schoknecht: In fact, this year we are going to introduce a value family of funds offered through the Sanford Bernstein acquisition, which was a great merger and we are looking forward to their products complementing ours. We've been very strong in the growth area and they are a top value manager, so the combination of the two will provide a tremendous competitive advantage.
MFMN: Are there any other areas in which Sanford Bernstein will be able to complement ACM International?
Schoknect: On the mutual fund side, besides the value family and maybe some specific local funds we will introduce through our joint ventures, we feel our product line is fairly broad. We tend not to be a product-of-the month type of shop. We listen to what the investors are looking for, but then we also make sure that we can deliver it with the level of quality and investment discipline that Alliance has built up over the years. I mean, we wouldn't introduce a Latvian hedge fund for the three investors who thought that was a good idea.
MFMN: For the first quarter of 2000, ACM International's funds made up 27 percent of Alliance's overall sales, a net increase of 91 percent over the same period the previous year. What was the percentage for the rest of the year?
Schoknecht: For the third quarter, the percentage was the same... the net, long-term fund sales ... were 27 percent non-U.S. and 73 percent U.S.
MFMN: Do you expect that percentage to increase over the next year?
Schoknecht: The markets outside the United States have tremendous growth potential and the U.S. is still growing, but the penetration of mutual funds in the United States is much higher. The U.S., per capita mutual fund penetration is $22,000. Outside the United States, there is no one even close. I think France has around $8,000 and that's the next closest. Even at Alliance, we look to the international market to continue to play an increasingly important role.
MFMN: Is the growth potential outside the U.S. the reason Alliance established an offshore center in Singapore? What else did ACM International do in the past year to position itself internationally?
Schoknecht: The center we set up in Singapore is an operations center. So now we have one in Singapore and Luxembourg and three in the United States. So we really provide 24 hour global coverage for operations activities. At the same time we moved our sales groups closer to their local marketplaces, so before the beginning of 2000 we had a large concentration of wholesalers in Luxembourg. Now we have a major sales office in Munich, which opened last May, we have a new sales office in Zurich, a new sales office in Madrid and a growing sales office in Paris. For 2001, we are looking at other markets like Scandinavia and the Netherlands to see if it makes sense to grow there and also in Asia and Latin America, where we need to establish a stronger presence.
MFMN: It sounds like Alliance spent 2000 building its sales channels in Europe. How do you plan to generate sales in 2001?