CAMBRIDGE, Mass. -- John C. Bogle Jr.'s departure from Numeric Investors LP has left most of its institutional clients unaffected, despite Numeric's shuttering of one of its market-neutral styles.
Institutions with investments in Numeric's original long-short market neutral style -- based on its earnings revision analysis -- were handed back their money.
And mutual fund investors may be in for some changes, if Numeric executives decide to refocus the firm on its institutional clients, selling or spinning off its mutual funds to Mr. Bogle or another firm.
Mr. Bogle was the driving force behind the firm's mutual funds, and might be the logical person to continue running them.
Watching and waiting
But institutional investors in Numeric's other market-neutral style and long-only styles are sitting tight with their allocations, and will be watching the firm closely in coming months.
These include: Portland General Electric Co., Virginia Retirement System, Massachusetts Pension Reserves Investment Management Board, BP Amoco PLC, Monsanto Co. and San Diego County Employees' Retirement Association.
Mr. Bogle left the firm Feb. 10 in the wake of recent poor performance for some of Numeric's strategies.
Performance numbers for Numeric's institutional portfolios were only available for its core aggressive separate account composite, of which Mr. Bogle had responsibility, according to PSN Effron. That strategy returned 16.8% in 1998, placing it in the ninth decile among core large-capitalization managers in the Pensions & Investments Performance Evaluation Report. The Standard & Poor's 500 stock index returned 28.6%.
And three of Numeric's four established mutual funds lagged in 1998, two of them significantly, while one shot the lights out, according to data on Numeric's Web site and Morningstar Inc., Chicago.
One person familiar with the firm interpreted the changes as resulting from recent poor investment performance and Mr. Bogle's desire to run his own shop, be it at Numeric or somewhere else.
As a result, Mr. Bogle potentially could purchase the mutual fund business personally, or as part of another company he might join.
Mr. Bogle also is a minority owner of Numeric, further complicating his departure.
Lynn Wickwire, director of mutual fund marketing and the company's spokesman, declined to comment about firm ownership. Mr. Wickwire said he had no knowledge of any possible changeover in ownership of Numeric's mutual fund business.
Mr. Wickwire also said neither Langdon B. Wheeler, Numeric's president and founder, nor Mr. Bogle was available for comment.
Mr. Bogle managed about $1 billion of Numeric's $5 billion in assets, according to a letter to mutual fund shareholders written by Mr. Wheeler.
Mark Engerman, chief investment officer and manager of value strategies at Numeric, will take over Mr. Bogle's duties as manager of momentum strategies, according to the letter.
Mr. Bogle's other mutual fund management duties will be assumed by Shannon Vanderhooft and Steve Cusimano, both portfolio managers, and Rich Harjes, co-director of research, the letter states.
"To our knowledge, it was a very amicable parting of the ways," said Carol Grefenstette, managing director for Strategic Investment Partners Inc., Arlington, Va., a limited partner in Numeric. She declined to say how much of the firm Strategic owns.
For now, institutions contacted are not pulling assets from Numeric, other than investors in the shuttered market-neutral style.
Portland General Electric executives are looking at how the loss of Mr. Bogle affects their separate account portfolios, according to Mahendra Shah, director-investments for the Portland, Ore.-based company.
Although Mr. Bogle didn't have direct oversight of the portfolios Numeric manages for Portland General Electric, he might have made broader contributions to the investment process in those styles, Mr. Shah said.
Hence, the company's executives and consultant, Collins Associates LLC, Newport Beach, Calif., will review the firm's situation, he said.
Collins officials could not be reached for comment.
Portland General Electric investment executives have been "generally satisfied" with Numeric's performance in the three styles they use: small-capitalization equities; microcap equities; and value-based equity market neutral, Mr. Shah said.
Numeric manages about $100 million of the company's more than $1 billion in defined benefit, defined contribution and nuclear decommissioning trust assets, according to Mr. Shah.
Virginia terminated Numeric several months ago for the long-short style that had been performing poorly and was closed, said Nancy Everett, chief investment officer for the Richmond, Va.-based fund.
The $33 billion system still has about $500 million invested with Numeric in its fair-value strategy, which Mr. Bogle did not oversee, she said.
Nonetheless, "whenever there is turnover, we always go in there and see that things are what they say they are," Ms. Everett said.
The situation is similar for other institutional clients. The Massachusetts PRIM Board, Boston, which oversees the $25 billion Massachusetts Pension Reserves Investment Trust, isn't making any changes now.
"It shouldn't have any impact in the short run" because Mr. Bogle was not Massachusetts' portfolio manager, said Scott Henderson, executive director and general counsel. "Right now, we see no reason to take any action."
Nonetheless, Massachusetts officials plan to meet with Mr. Wheeler in coming weeks to discuss how the personnel change might affect its $200 million small-cap growth portfolio longer term, Mr. Henderson said.
"John wore a number of hats, as we understand it," he said.
Still has faith
The U.S. arm of BP Amoco in Chicago had money invested with Numeric's original market-neutral strategy, and continues to have money with its value-oriented market-neutral style, said Greg Williamson, investment manager for BP Amoco Trust Investments-Americas.
He declined to provide specific numbers.
BP Amoco executives believe Numeric has a deep bench. "We've been very pleased with the quality of people they've brought on board," Mr. Williamson said.
Mr. Bogle was not the principal portfolio manager for two other pension fund clients, Monsanto Co., St. Louis; and San Diego County Employees.
Gary Stentz, director, pension asset operations for Monsanto, said company executives will look at Numeric's changes at its next manager review meeting.
Mr. Engerman is Monsanto's lead portfolio manager for its $20 million equitized value long-short account with Numeric, Mr. Stentz said. Monsanto has $4.5 billion in global pension assets.
Although Mr. Bogle was not directly involved with portfolio management for San Diego County, officials want to be sure there won't be any side effects to his departure, said Robert Snigaroff, chief investment officer. San Diego has about $55 million of its $3.5 billion in assets invested in Numeric's fair-value style.
While Numeric's performance for San Diego in the third quarter was "difficult," longer term performance has been good, Mr. Snigaroff said.
Numeric's majority shareholder is Mr. Wheeler, according to the PSN Effron performance database. Others with stakes in the firm include James G. Sloman Jr., managing director and director of portfolio strategies, according to PSN Effron.
Vineeta Anand contributed to this story.