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Tuesday, January 09, 2001

Stand by Me

Reported by Tamiko Toland

Neuberger Berman and AMVESCAP have both announced the formation of national trust companies. Although the trust companies are technically the same, they will be used differently by the parent firms. Because of legal restrictions, investment companies have until now avoided starting national trust companies.

Neuberger Berman presently administers $4 billion in separately managed accounts in state-chartered trusts in New York, Delaware, and Florida. The new entity, Neuberger Berman National Trust Company, is based in Seattle, giving the firm a West Coast presence in the trust arena. The firm will soon add to that presence.

"We will shortly be establishing a trust office in Los Angeles, where we already have a regular office," said Heidi Schneider, executive vice president of Neuberger Berman and head of Private Asset Management. "Probably as soon as we can find people to staff it."

Schneider also said that the firm is considering the possibility of opening trust offices in San Francisco and Texas. Although Neuberger Berman will hang onto the state-chartered trusts for now, it makes sense to merge the New York and Florida trusts into the national company as time goes on. The Delaware trust company will probably remain because the state has laws particularly advantageous to wealthy families.

With trusts available only in three states, how much money has been slipping through the firm's hands?

"When we first started the New York trust company, one of the main reasons we did it was that, on the private client side, about a third of our clients' assets were in trusts," said Schneider. "That was one fact that led us to think that this would be a good business to be in. Secondly, with all the new wealth that's been created, particularly in the last decade, a lot of those people are still in the process of setting up trusts."

If the firm's estimates for New York hold true for the entire country, it would stand that, with $18 billion in non-trust separately managed accounts, Neuberger Berman could look to manage $6 billion in trusts from existing clients. With the infusion of new money, however, the firm is looking at an increase of more than $2 billion.

How much does Neuberger Berman hope to grow?

"One of the things that we say when we talk to Wall Street analysts is that we expect to grow the business 15% a year," said Schneider.

Using these figures, it seems that the firm expects to grow its separately managed account business by $3.3 billion. With its aggressive schedule of aquisitions and this recent move, Neuberger Berman may well reach that target next year.

AMVESCAP has also started a national trust company, but its focus remains on institutional defined benefit clients. It presently offers trust funds through a Denver-based trust company, expanding its market with the national model.

"We're going to have a much broader audience that we can attract," said Robert Thomann, president and chief executive officer of AMVESCAP National Trust Company we're going to take a broader role in supporting our sister companies, Aim and Invesco."

AMVESCAP uses trusts to gather assets from smaller retirement plans, broadening its potential market. Will the company start offering trusts to individual investors?

"We have that capability, but one of the things we want to be careful of is that most of our product is sold through third party intermediaries and one of our objectives is to complement that," said Thomann. "We don't intend to compete with our third-party sales force."

With that in mind, the firm could develop a wrap type product for its mutual funds which brings trust capabilities to intermediaries at a reasonable price.

"We don't have any immediate plans to bring the two together," said Thomann. "It's something that will develop over time. Our goal is more to meet the needs of the market."


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