The News: Assets Ride the Elevator
A trusim in asset management is the assets ride the elevator out of the office each night. Events surrounding the weekend ouster of Jeffrey Gundlach, chief investment officer at Los Angeles-based TCW Group, spotlight a career-related issue that could recur frequently in 2010 as competition for buy-side talent ramps up.
Gundlach was fired in a surprise move Dec. 4 after the company he'd worked for since 1985 concluded he'd been planning a mass defection. Gundlach told Bloomberg News he'd proposed a management-led buyout in September and got no response, but denied he'd threatened to leave the firm. But other sources told the newswire he'd been talking with Western Asset Management Co. and BlackRock about joining them.
Now, Gundlach says his options include starting a fund company on his own or linking with another asset manager. (He says he's had "many inquiries" from existing firms.)
Setting aside the two sides' conflicting explanations for the firing, the incident illustrates the economic power that a fund manager with a track record holds. As the industry regains its economic health and investors regain their risk appetite, there is potential for more star fund managers to grow restless in coming quarters - especially those who feel shortchanged by their 2009 bonus.
For analysts and junior portfolio managers, the takeaway might be this: take care of your team, and give them reason to take care of you.
In just two days, at least 14 professionals have followed Gundlach out of TCW, according to Bloomberg. More ominously for the firm, two institutional clients told the newswire they plan to withdraw money as a direct result of the departures.
TCW, a subsidiary of Paris-based bank Societe Generale, has $110 billion assets under management. The fixed-income team Gundlach led oversaw about 59 percent of those assets. Besides the role of chief investment officer, Gundlach also co-managed TCW's $11.9 billion Total Return Bond Fund - which reportedly outperformed 99 percent of its peers over the past five years. Co-manager Phil Barach was among the professionals exiting TCW in his wake.
The firm replaced Gundlach's team with bond managers from a crosstown rival it just acquired, Los Angeles-based Metropolitan West Asset Management LLC.
TCW Investors Plan Redemptions as 14 Employees Follow Gundlach [Bloomberg News]
Bailout Refund Is All About Pay, Pay, Pay [NY Times]
House to Raise Taxes on Fund Managers [WSJ]
Morgan Stanley Shuffles Executive Suite [WSJ]
Dexia Said to Join Firms Weighing Sale of Private Banking Units [Bloomberg News]
Debt Raters Avoid Overhaul After Crisis [NY Times]