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TWST: Let’s start with a description of your group in general. What are your expectations for them in 2001?

Ms. Ouimet: Most of the managers that I cover are small to mid-cap asset management companies. Over the long term our top pick is Affiliated Managers Group (NYSE:AMG), a company that positions itself to buy a majority stake in asset management affiliates and assist the affiliates with succession issues. To date, these have generally been equity style managers. If you group all of the affiliates that AMG has taken a stake in, over 90% of the asset classes are in the equity business. They are clearly vulnerable in the current market conditions because of a heavy weighting in equities, although within the equity structure, they are evenly diversified between value and growth. As the equity markets come back, that part of the business may be more sound because they have the diversity versus a money manager who is more growth-oriented in equity style. Affiliated Managers buys a majority stake in high quality mid-sized asset management companies. These smaller managers are a fast growing piece of the asset management industry, and, since Affiliated Managers Group only takes a partial share of ownership, the affiliates’ equity participation provides them with the incentive to continue growing the business. It’s a unique structure, and Affiliated Managers is the only company that does this successfully. We believe it is a very good model long term. They are looking for more fixed income, but they’re extremely disciplined in their acquisition approach. They look for good companies and accretive acquisitions versus trying to acquire a certain style or asset class. Last fall, they walked away from a few deals, which actually turned out to be good timing. For years they have been in contact with more than enough companies out there, and the pipeline is still strong.

TWST: Where do these companies fit into a portfolio today?

Ms. Ouimet: It’s a long-term strategy. The scarcity value is always going to be there to support valuations in the publicly traded companies. A number of them are still repurchasing shares, which is also supporting the prices. All in all, the asset management industry will continue to be a very attractive industry. If you believe long term that high net worth and retirement assets will continue to grow and that new tax laws and global pension reform will boost both of those, then you have to own one of these companies in your portfolio to play these trends. There are under 20 public companies left in the United States that allow the investor to play in the growth of the asset management industry.

TWST: Performance-wise — where are the risks in this group?

Ms. Ouimet: If you dig down, the pure growth equity managers are going to be the hardest hit in the current market environment. The blended equity managers will be the next hardest hit. Then growth/income, because you still have that growth component. After that you get into bonds funds, which have regained popularity, and then money market funds. We have witnessed much more switching within a fund family than full-blown redemptions from the asset management complexes. I think the individual investor is migrating back to the advice channel but is too savvy at this point to sit in a bank account with little or no interest. I also do not see them running to be locked up in certificates of deposit, as they are more educated regarding the equity and fixed income markets.