CHICAGO -- Strong demand for market-neutral and small-capitalization equity has led Harris Investment Management Inc. to begin to offer investment management in styles in which the firm has only a two-year track record.
This month, Harris began marketing a market-neutral strategy. Later this year it will start marketing a small-cap growth equity style.
In addition, Harris this month began marketing a small-cap value equity strategy, which has a well-established track record.
Pension executives and consultants are willing to consider managers with less than the more typical three-year record because of high demand for that style, said William O. Leszinske, president and chief investment officer.
All three of Harris' styles -- even the growth one -- will have a value tilt, Mr. Leszinske said.
The market-neutral one is an extension of Harris' core large-cap value equity style, said Daniel L. Sido, senior partner and portfolio manager for the strategy.
Harris' strategy combines long positions with short selling, which involves selling shares of a company that aren't directly owned by the investor, and borrowing them from another investor with the expectation that the price will fall. The investor can then buy them back at a lower price.
Market-neutral managers using long-short strategies typically try to match up "longs" and "shorts" so that market exposure is minimized or eliminated, leaving only relative performance on the upside and downside. Market-neutral strategies often are equitized with derivatives.
Mr. Sido said trading on the short side of the market has proved to be easier than anticipated, even though Harris' experience is on the long end.
Harris manages $25 million in market-neutral assets, most of which is corporate pension money.
Harris executives noted that the market-neutral strategy also will be available in a commingled fund, which they believe is unusual.
Harris' small-cap value strategy is run by Thomas M. Corkill, partner and portfolio manager, while its small-cap growth strategy is managed by Douglas G. Madigan, senior portfolio manager.
Both will use the same basic process in which a computer searches for companies with value attributes selected by Harris.
Analysts then make recommendations to portfolio managers from that list.
A major difference between the value and growth styles will be the variables that Harris emphasizes for each, and the universe of stocks in which the computer will search for company names, Harris executives said.
"Our work suggests both of these products can be successful simultaneously," Mr. Madigan said.
And in the relatively short life of the small-cap growth style, there has been only one instance in which a company turned up on both the value and growth lists, he said.
Harris manages $100 million in small-cap value assets and $280 million in small-cap growth.
The two styles are capped at $500 million and $600 million respectively.