LOS ANGELES - Three money managers have left Palley-Needelman Asset Management Inc. to launch an equity manager for Metropolitan West Securities Inc.
Howard Gleicher, Gary Lisenbee and Steve Borowski collectively will hold 50% ownership of Metropolitan West Capital Management, pending final arrangements; MetWest Securities will own the other 50%.
Mr. Gleicher is MetWest Capital's chief executive officer and chief investment officer; he was a principal and portfolio manager at Palley-Needelman. Mr. Lisenbee is president of MetWest Capital; he was a principal and senior portfolio manager. Mr. Borowski is managing partner; he was managing director of marketing and client services at Palley-Needelman.
"You can't imagine the difference in feeling we have from last week, between working for a firm and owning a firm," Mr. Gleicher said.
Newport Beach, Calif.-based MetWest Capital manages equities for institutions and individuals with an active, bottom-up style. It is open for business, but officials won't say how much money the new firm is managing.
Mr. Gleicher said their style at MetWest Capital is similar to the style they used at Palley-Needelman, but with more downside protection.
"We want to recognize fundamental deterioration more quickly and sell before a stock declines. We do that by developing contacts other than investor relations. And we'd like to focus on buying companies where the risk-reward on securities is very favorable; diversification won't lead us to purchase securities we wouldn't otherwise purchase. We'd like to focus on the next two years, instead of the next quarter's earnings."
Portfolios will be more concentrated, with 35 rather than 45 stocks, and there will be a focus on secular trends and themes, said Mr. Gleicher. The approach will be value-oriented, with a mid- to large-capitalization focus.
This is the second financial management subsidiary created by MetWest, which specializes in short-term cash management and securities lending.
Last summer, MetWest established a fixed-income subsidiary with a group of managers that had left Hotchkis and Wiley, another Los Angeles money management firm. That subsidiary, Metropolitan West Asset Management L.L.C., now has about $1.5 billion in fixed-income assets under management.
Richard Hollander, chief executive officer and chairman of MetWest, said the managers hired for both subsidiaries sought out MetWest because their employers were being sold.
The fixed-income money managers for MetWest Asset Management left following the sale of Hotchkis to Merrill Lynch & Co. Inc.
The owners of Palley-Needelman are known to be in discussions to sell the firm to Boston-based United Asset Management. Although UAM negotiations fizzled at one point, sources say the deal is expected to go through eventually. Palley-Needelman is owned equally by Roger Palley and Chet Needelman.
Mr. Gleicher said some of the Palley-Needelman investment management staff discussed buying into the firm, but the owners wanted a 100% purchaser.
"How do you pay them for that and come up with a model, then spread equity capital around to others in the business," and still put money into the firm, Mr. Gleicher asked.
Mr. Hollander said there have been no attempts to bring Palley clients to MetWest. But "if clients choose to transfer, we'd be open to servicing their needs," he said.
The parent, MetWest Securities, is owned by eight partners: Mr. Hollander (with the largest share, 44.46%); former California Gov. Thomas Hayes; former California Director of Finance Russell Gould; R. Rick Moos; Terry Moos; Paul Chow; Edward E. Curiel; and Richard H. Schweitzer.
Mr. Hollander in the 1980s worked in the institutional fixed-income division of PaineWebber Group Inc., then the high-grade bond division at Drexel Burnham Lambert. He founded The Signature Group in 1988, a mortgage and real estate investment fund.
Mr. Hollander and the partners established MetWest Securities in 1992. It has $13 billion in assets under management.
MetWest Securities is in the process of changing its name to MetWest Financial, to better reflect its investment management focus.
MetWest Asset Management is 40% owned by MetWest Securities. Two former Hotchkis investment staff, Ted Rivelle and Laird Landmann, are both managing directors with 20% ownership each. Scott Dubchansky, formerly with Donaldson, Lufkin & Jenrette of Los Angeles, holds 20%.