Scudder, Stevens & Clark

SCUDDER, STEVENS & CLARK

Background

Scudder, one of the nation’s first investment counseling firms, founded in 1919 by Theodore Scudder, Haven Clark, and Sydney Stevens, had performed a successful development until 1993. Especially in 1980s and the beginning of 1990s its mutual fund business was one of the fastest growing mutual fund families in terms of growing account numbers, asset size, and revenues. Meanwhile, thanks to corporate pension plan sponsors directing their funds to large sophisticated and diversified money management firms, its institutional business was also growing. Scudder’s mutual fund business was the first to introduce international mutual fund and no-load mutual funds in the U.S. in 1970s. The firm’s investment counseling business was executed by geographically separate offices (Boston, New York Philadelphia, Dallas etc.). In the course of time, some of these district offices became specialized teams on the investment side of the business (for example, equity research analysts and portfolio managers in New York office, fixed income specialists in Boston office). Parallel to its domestic growth, the firm’s international branches had been opened and international instruments offered had been increased in numbers. In 1980s, with the expansion in the organization structure and the increase in the instruments offered, the firm had improved both its database and service technology; furthermore the firm’s organizational structure was changed from partnership form to corporate form. Its service policy was based on direct marketing. Its basic concern in providing its services was to deliver quality investment services and to add value for its clients and therefore, their investment portfolios were composed investment instruments with relatively low risk and moderate return.

Key Issues

Between 1919 and 1993, Scudder had had a successful business life in terms of a number of aspects, such as offering new types of products (both national and international), its growing organizational structure and financial success for itself and its clients. However, these developments, at the same time, have result in some concerns related to how to maintain and manage these improvements and growth in its future business life.

One of the main issues is that its marketing policy is limited to direct marketing, and therefore the firm was faced with some limitations to disperse its services or products. The other issue is that although Scudder’s stock and bond funds were considered successful in terms of below-average expenses, it did not struggle to provide alternative instruments, such as index-like funds or multiple funds, for its customers to attract them. Another reason to behave conservatively in creating hot products could be that especially, at the beginnings, its some local offices were not willing to evolve mutual funds broadly, and they were intending to maintain tradition of private investment counseling firm business, and its employees were also its owners, they did not want to jeopardize the business. Therefore, when providing services, its philosophy substantially focused on balancing investment and marketing considerations and adding value to its customers. The other trouble was that Scudder’s equity funds with satisfactory returns could not achieve being a “flagship” equity