International money manager Akamai International L.P., Wayne, Pa. closed June 30, as merger mania claimed yet another victim and forced one-time entrepreneurs into the arms of a larger firm.
But Akamai principals Rick Roberts and George Greig seemed to have gained more than they lost after they dissolved two-year-old Akamai - a partnership of Pilgrim Baxter & Associates, Wayne, Pa., and Framlington Group P.L.C., London. The two have joined Provident Capital Management Inc., Philadelphia, where they take on an international portfolio of $960 million, vs. $70 million at Akamai.
At Provident Capital, "we gain a long track record, since the firm has been in business since 1978, more support for (international portfolio manager) George Greig, and a sizable amount of assets under management," said Mr. Roberts, now Provident Capital's institutional marketing director. He had been Akamai's marketing director, and Mr. Greig had been its portfolio manager.
The two opted to explore other opportunities after Pilgrim Baxter was purchased earlier this year by United Asset Management. The acquisition of Pilgrim Baxter threw Akamai's future into question, and encouraged Akamai's principals to seek alternative arrangements. Provident Capital's offer proved to be the most attractive, said Mr. Roberts.
Mr. Roberts' position is a new one; Mr. Greig replaces Herbe van Caloen, with whom the firm had a "mutual parting," said Young Chin, Provident Capital's president and chief executive officer. Analyst Stephanie Gamber also left, but has not been replaced, said Mr. Chin.
Mr. Chin hopes the additions will beef up institutional interest in Provident Capital's international offerings. "We have regular interest in, and calls from, the institutional community for our domestic large-cap value and small cap-value investment offerings. Where we come up short is in having enough solicitations on the international side," he said.
None of Provident's international equity assets is in separate institutional accounts. About 20% come from individuals; the bulk is from trust accounts from PNC Bank and other institutional relationships. All assets are managed in two mutual funds, a broad international fund and an emerging markets fund.
Messrs. Greig and Roberts will provide a third international product - a broad international offering with an emerging markets bias, similar to their strategy at Akamai.
Akamai's $70 million came from serving as subadviser to two mutual funds - Pilgrim Baxter's PBHG International Fund and Framlington's International Growth Fund. Akamai's only pension fund client was Southern Co., which invested $10 million in the PBHG fund. Those subadvisory relationships have been terminated.
Noted Mr. Chin: "There had been barriers to George's and Rick's efforts in terms of attaining institutional accounts in their prior association." Support staff will be more abundant now - eight analysts at PCM vs. one trader-analyst at Akamai.
"They will help (Mr. Greig) identify opportunities, particularly in sectors that go beyond political borders, such as banks, insurance companies and natural resources companies," Mr. Chin said. Provident Capital also has more back-office and other support systems, said Mr. Roberts.
In turn, the Roberts/Greig pair brings a strategy that fits well with Provident, according to Mr. Chin. That process is a combination top-down, bottom-up investment approach, one that involves both subjective and quantitative decision-making.
"Our overall approach begins with a value orientation," explained Mr. Roberts. "Then, measures of momentum combine to drive short-term timing and tactics of both country allocation and stock selection."
Provident officials believe institutional investors like having a combination of subjectivity and quantitative analysis. That blend helps temper subjective bets: investments become more understandable to clients, and results become more predictable, the firm's officials believe. In contrast, excessive use of fundamental or quantitative analysis can produce extreme results - perhaps too much "shooting from the hip" by extreme fundamentalists or ignorance of "the underlying companies," where quantitative analysis rules, Mr. Chin suggests.
"Having a blend of the two ensures that fundamental insights translate into incremental returns," Mr. Chin said.
Marketing is still bound to be a challenge, especially in the well-combed sector Provident Capital is targeting - institutions with $500 million or more in assets.
