Anhalt/O'Connell & Steffanci Inc. has resigned its fixed-income accounts, and Brundage Story & Rose LLC has sold its businesses to a unit of Donaldson, Lufkin & Jenrette Inc. and to Bessemer Trust Co. NA.
Paul Anhalt, chief investment officer of the firm that bears his name, said its major client, Lockheed Martin Corp., decided to take back its long bond business and manage it internally.
David Toth, a vice president at Lockheed Martin Investment Management Co., Bethesda, Md., who oversees the pension fund, refused to comment.
Los Angeles-based Anhalt had been managing more than $700 million in Treasury securities for the $20 billion pension fund. Those assets made up 90% of Anhalt's business. After the Lockheed Martin change, Anhalt resigned its other accounts, which included $20 million for Raymond James Financial Inc., St. Petersburg, Fla., and $2 million for the First Baptist Church, Jacksonville, Fla.
"Lockheed hired us in 1979, the year we started the business," Mr. Anhalt recalled. "We were their swing duration fixed-income manager. We used a duration adjustment strategy and shifted from long to short (duration), as the markets changed.
"It's the end of an era for us," Mr. Anhalt said.
He and his two partners -- Michael O'Connell and Thomas Steffanci -- are considering other options for a fixed-income business. But it's unlikely to involve Treasuries. "There has been an erosion of interest in the Treasury market. The amount dedicated to them has fallen off, because of their low yields," Mr. Anhalt said.
In New York, the Brundage, Story & Rose fixed-income team, with $3.3 billion in assets under management, will move to DLJ Asset Management Group.
The remaining $4.5 billion in assets, of which $800 million was institutional equity business, will be acquired by Bessemer, a wealth management investment firm.
Unlike the story at Anhalt/O'Connell, Brundage's fixed-income business has been steady, said Deborah C. Foord, a Brundage principal, who is joining DLJ.
It made sense to team up with DLJ in order to offer clients a wider array of services, said H. Dean Benner, also a Brundage principal, who will become head of DLJ Asset's institutional core and core plus fixed-income business, a new position.
The firm's 13 fixed-income investment professionals also will join DLJ. Terms of the deal, which is to close at the end of September, were not revealed.
Mr. Benner and Ms. Foord owned the fixed-income business that DLJ Asset acquired. Eight other Brundage execs -- including Francis S. Branin, chief executive officer -- sold the remainder of the business to Bessemer.
Ms. Foord, who will be a managing director at DLJ, said Brundage's 24 fixed-income clients have been informed of the change, and they view it favorably. "I don't expect that they will see any difference."
Gary Herndon, deputy treasurer at the $800 million Tallahassee (Fla.) Pension Plan, said that the fund's board will review its $225 million account with Brundage.
DLJ's fixed-income business focuses on cash management and high-yield products, but it doesn't offer the enhanced index approach in the core/core plus area and asset-liability matching strategies that are specialties of Brundage, Story & Rose, said Mr. Benner.
Brundage Story was founded in 1932 to cater to wealthy clients. In 1990, Mr. Benner started the fixed-income division to diversify the business and bring in institutional clients.
The Brundage acquisition is the second this year for DLJ Asset.
In April, it announced plans to acquire the asset management division of First Dominion Capital LLC, the financial services arm of Dominion Resources Inc., an energy holding company based in Richmond, Va. First Dominion managed $2.5 billion in leveraged loans, high-yield bonds and mezzanine debt.
In a statement, G. Moffett Cochran, chairman of DLJ Asset Management, said that the combination of the two acquisitions will allow DLJ to establish a platform on which to grow a major institutional fixed-income management business. The firm plans to target the United States, Europe and Asia. It oversees $30 billion in assets, of which $17 billion is in fixed income.
In February, three other money mangers shed their basic bond businesses.
Atlantic Portfolio Analytics & Management Inc., Orlando, Fla., sold its $1.8 billion core fixed-income business to Utendahl Capital Management LP, New York, so it could focus on its stronger fixed-income hedge funds and investment technology products.
Forstmann-Leff International, Inc., New York, a unit of Refco Group Ltd., and Wilshire Asset Management, a division of Wilshire Associates Inc., Santa Monica, Calif., in unrelated actions each divested their bond units because they couldn't build enough of a critical mass to be considered in most searches. Forstman-Leff sold its $700 million in fixed-income assets to Pareto Partners London, but Wilshire closed its fixed-income unit.