CHICAGO -- Three top executives left Northern Trust Quantitative Advisors Inc. to launch their own active quantitative equity management firm in partnership with AmSouth Bancorp.
They are Neil Wright, who was chief investment officer; Peter Jankovskis, manager-research; and Janna Sampson, manager-active product.
All three came over to NTQA when Northern Trust Corp., Chicago, bought ANB Investment Management Corp. from a unit of First Chicago NBD Corp.
They are forming OakBrook Investments LLC, based in Lisle, Ill. AmSouth Bancorp, Birmingham, Ala., will have an equity stake in the new firm. Mr. Wright said AmSouth will have a 50% voting share and will be entitled to 30% of the revenue. Michael C. Baker, senior executive vice president and capital management group head at AmSouth, said AmSouth will own 50% to start. The three principals own the rest of the firm.
AmSouth will assign $50 million from its pension fund to OakBrook to invest in its two portfolio strategies, Mr. Wright said, to allow it to keep its funds track record going. Mr. Baker declined to comment on that arrangement.
Also, OakBrook will manage two new AmSouth mutual funds, based on the two quantitative styles developed by Mr. Wright. AmSouth hopes to launch the funds in two to four months, as soon as OakBrook gets regulatory approval.
In addition, the OakBrook principals hope to persuade their NTQA clients to move with them to the new firm. At NTQA, Mr. Wright's group managed about $900 million for 16 clients.
He said he and his colleagues have called all of the NTQA clients. Some indicated an interest in OakBrook, but none as yet has agreed to move to the new firm, Mr. Wright said.
Stephen N. Potter, vice president and a director of NTQA, said its staff has contacted every client as well. Mr. Potter said Northern Trust executives were "chagrined" at the OakBrook executives calling the NTQA clients, but declined to say if they had done anything improper.
Mr. Potter said none of the clients said they have decided to leave Northern Trust. "We want to retain all these clients," Mr. Potter said. He said more than half of the clients have other relationships with Northern Trust.
The OakBrook deal is AmSouth's third such investment management interest, all done in the last year. It has stakes in Rockhaven Asset Management LLC, Pittsburgh, and Sawgrass Asset Management LLC, Jacksonville, Fla.
Mr. Baker said AmSouth is looking for other deals, but nothing is imminent.
Through the partnerships, Mr. Baker said, AmSouth hopes, among other advantages, to tap revenue it otherwise might not be able to access, and provide investment products for its customers, including in its 401(k) business.
Ms. Sampson said the three former NTQA executives felt they could serve the active clients better in a separate organization.
"Northern Trust clearly bought ANB for the indexing," she said.
Mr. Potter said NTQA remains committed to the active quantitative products. "It's clearly our intention to grow," he added, and develop new quantitative products.
Of the two strategies Mr. Wright managed at NTQA, some $600 million is in a so-called market power strategy, which seeks companies that have a competitive edge because of factors such as brand name, economies of scale or technology; and $300 million is in a "winner's curse" strategy that seeks to exploit stock mispricings. The strategy is an enhanced Standard & Poor's 500 index fund, consisting of about 350 stocks and using game-theory rules in part to screen stocks and decide at which price to buy them. The winner's curse notion helps determine the market's consensus price of a stock and its typical trading range.
Mr. Potter said Northern has no plans to replace Mr. Wright at NTQA. John R. Goodwin, NTQA chief investment officer-passive management, now will oversee the quantitative group in addition to his duties overseeing NTQA's and Northern Trust's $36 billion in index funds.
"We won't replace Neil and have someone with the title cio-active management," Mr. Potter said.
"Neil created good product that we own now," Mr. Potter added. As a quantitative strategy, "they created a product and approach that is repeatable and not dependable on any one person to manage."
In addition, Northern Trust plans to transfer in the next few weeks its $350 small-capitalization stock fund, run in a quantitative style, to its NTQA unit, which will also be under Mr. Goodwin's oversight.
Executives from the Atlanta office of Lamalie Amrop International -- an executive search firm that has been working with AmSouth -- first approached the three about AmSouth's interest around the time Northern bought ANB, a deal that closed at the end of last year, according to Messrs. Wright and Jankovskis.
OakBrook plans to hire a marketing person and another for portfolio management.
