A Five-Year Mission
For Youngblood, the transaction was a triumphant conclusion to a courtship that lasted a half decade. “I had been pursuing conversations with the company, so when the opportunity presented itself, I was a known entity,†he says. “The management of American Beacon knew me and the senior management at AMR knew me. So that was an advantage.†Those relationships paid off in September 2008 when Pharos closed the deal.
Meeting that objective required patience and persistence. In 2003, AMR Corp., like other airline companies, had run into liquidity issues and problems with its labor unions. As a result, AMR Corp. looked to sell its money management business to generate some cash. Youngblood jumped at the opportunity. “When they put the company on the block, it looked like they would go into bankruptcy and the unions looked like they wouldn’t settle on a contract,†recalls Quinn. However, an agreement was reached and newly installed AMR Corp. CEO Gerard J. Arpey felt it made sense to keep the asset management business at that time.
Youngblood would not gain his next opportunity until 2008, when AMR Corp. hired Credit Suisse to sell the business, which was renamed American Beacon Advisors Inc. amid pressure from shareholders to recognize the business’ value. At that time, the firm had grown to $65 billion in assets under management, of which American Airlines represented some $20 billion. “Pharos had a very competitive bid, but a number of people had very competitive bids,†recalls Quinn. “But we knew Kneeland very well and we felt that we could grow faster with him than we could have otherwise.†The minority designation was a factor and, unlike some of the competing bids, the transaction wasn’t subject to financing or market conditions.
The firm’s investment strategy is simple and complicated at the same time. Rather than having a team of in-house fund managers, American Beacon employs a manager-of-managers approach where they cherry-pick fund professionals from various financial institutions based on their respective investment strategies and performances. “We try to pick the best managers in certain disciplines,†explains Youngblood, who sits on American Beacon’s board of directors. “We think it clamps down on the volatility and gives better returns over time. It’s about consistency rather than stellar returns one year and drastic losses the next.â€