Downtown L.A.’s City National Bank was officially acquired by Toronto’s Royal Bank of Canada on Nov. 2, but its local customers shouldn’t expect too much to change.
The signage at all City National’s branches will stay the same. Russell Goldsmith will remain chief executive, and he’ll even add to his job by taking over RBC’s U.S. wealth management business.
However, one more local bank is now under out-of-town ownership courtesy of just the latest in a series of deals that have reshaped L.A.’s lending landscape. Between June 30, 2011, and June 30 of this year, the number of banks and thrifts headquartered in Los Angeles has dropped from 77 to 55.
Many L.A.-area bank executives and insiders have lamented to the Business Journal that a local institution such as City National now has out-of-town ownership. Goldsmith took over as chief executive from his father, Bram, who is the son-in-law of the bank’s first chairman.
L.A.’s second-largest bank, Pasadena’s OneWest, was acquired in August by CIT Group Inc. in Livingston, N.J. OneWest was formed by a handful of hedge funders from the ruins of failed IndyMac Bank, so its sale did not inspire the same nostalgia.
But Dominic Ng, chief executive of Pasadena’s East West Bank, said the fact that local management will remain in place made the City National deal different from other local bank mergers.
“What I love about the City National deal is that City National is still City National,” he told the Business Journal earlier this year. “Royal Bank of Canada’s not changing the name. So our icon’s still there. They’re still the largest bank in town.”
RBC Chief Executive Dave McKay has promised that local control will continue. RBC has no plans to open its own branches in the United States; instead, City National will serve as its American retail banking arm. And that will remain Goldsmith’s show.
“(City National’s) successful because they’re close to their customers,” McKay said. “They’re entrepreneurial in how they serve customers quickly. All this has to remain in place.”
West L.A.’s Aristotle has a new mutual fund and the investment firm is not thinking big. In fact, it’s the exact opposite.
On Nov. 3, Aristotle announced the launch of the Aristotle Small Cap Equity Fund, which will be managed by Dave Adams and Jack McPherson at the firm’s Boston office. Aristotle acquired Adams and McPherson’s team in January.
Adams said the fund uses a buy-and-hold strategy, typically keeping stocks for an average of six years.
“We’re constantly looking for underfollowed, underserved and underappreciated investments,” he said. “We’ll meet with hundreds of companies over the course of the year, but in a sense we’re looking for 10, 20, 30 good ideas. We’re a fairly low-turnover manager.”
Actively managed mutual funds have been somewhat out of fashion recently, as billions of dollars have flowed out of those investment vehicles and into exchange-traded funds. ETFs trade throughout the day, like stocks, and tend to charge lower fees than mutual funds. They often, but not always, track a specific index.
Matt Schleichkorn, a managing director at Aristotle, acknowledged the sea change, but feels like Adams and McPherson’s small-cap strategy is best suited for active management.
“We see that there is a great deal of calling for active management in small cap, largely because of people like Dave and Jack who have that experience,” Schleichkorn said. “They can decipher the market much better than simply mirroring an index.”
Their track record speaks for itself, he added.
“We do recognize that many active managers have not been ahead of their benchmarks,” Schleichkorn said. “We’re very fortunate that Dave and Jack have consistently been ahead of their benchmarks.”
Have It Your Way
Recently reopened downtown L.A. institution Clifton’s Cafeteria started during the Depression with a “pay what you can” policy. Marina del Rey investment firm Aspiration didn’t begin in times quite as tough, but it’s adopted the same ethos.
However, that approach doesn’t impact the firm’s bottom line, said Aspiration co-founder Joseph Sanberg.
“More than 90 percent of our customers pay us an average fee by industry standards,” he said.
Sanberg and his co-founder, Chief Executive Andrei Cherny, believe that the current financial services landscape more than adequately serves the wealthiest Americans, but current offerings serving the middle class and mass affluent are lacking. Aspiration’s Flagship mutual fund is designed to provide exposure to investment strategies previously available almost exclusively to high-net-worth earners – and requiring only a $500 minimum investment. Sanberg hopes the fund’s returns – and the fact that customers choose the fee – will give Aspiration’s target market a whole new perspective on the financial services industry.
“We believe this addresses a pain point so well that it inspires customers to be our best evangelists,” he said.
Westwood real estate peer-to-peer lender AssetAvenue has promoted Varun Pathria to chief executive. He was previously the firm’s chief investment officer. … New York real estate private equity banking firm Carlton Group has hired Russell Beer to run its Beverly Hills office. Beer is founder of New York boutique investment bank Big Ocean.
Staff reporter Matt Pressberg can be reached at firstname.lastname@example.org or (323) 549-5225, ext. 200.
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