BERWYN, Pa. - Other asset management firms might be tightening their belts, but Turner Investment Partners is intent on expansion.
Assets are growing fast. Net new assets totaled $2.2 billion in 2001, mainly from sales of its flagship midcap growth equity strategy and short-term fixed income. Cross-selling of investment products has been brisk, with 22 clients giving Turner additional assets last year. About 40% of Turner clients use multiple investment strategies, said Stephen Kneeley, president of the Berwyn-based manager.
The firm has $9.5 billion under management: $8.5 billion is managed in multicap active domestic growth equities and $1 billion in active domestic core fixed income. The company manages 21 mutual funds and distributes funds for two other companies with different investment styles.
But the plan, said Mr. Kneeley, is to turn this midtier investment management company into a much larger manager with diverse investment strategies.
"We're in the sweet spot. It's akin to being a midcap stock manager right now: All the market forces are in their favor. The big guys are doing everything they can to shoot themselves in the foot and their self-induced problems are helping smaller managers like us, who are nipping at their heels," he said. "We've gotten to a size where business services take care of all the administration, and client service and investment professionals handle client contact very well. That leaves the investment teams free to do nothing but manage money."
Turner's first expansion was into active domestic small-cap value equity management. Rather than buy a company, Turner lifted a team out of Aeltus Investment Management, Hartford, Conn. Thomas DiBella and Kenneth W. Gainey joined Turner as portfolio managers March 4. The two form the core of a new investment team that will manage active, domestic small-cap value equities from Hartford.
The new small-cap value team will stretch its wings a little, using a more value-oriented style than the small-cap core-with-a-value-tilt approach they used at Aeltus, Mr. Kneeley said. The team came straight into management of two new mutual funds - the Turner Small Cap Equity Fund and the Turner Small Cap Value Opportunities Fund - as well as institutional separate accounts.
Whether the pair will expand their repertoire to include large-cap growth equities is under review. "I have confidence that Tom can manage large-cap equities, but we may find it better to add more support for that effort," Mr. Kneeley said.
Tracey Sherman, a spokeswoman for Aeltus, said Mr. DiBella and Mr. Gainey were part of a larger team that managed the small-cap core strategy. Assistant portfolio manager, Carolie Burroughs, who has been a member of the team for four years, was promoted to lead manager to replace Mr. DiBella for management of the $372.5 million Small Company Variable and $311 million ING Small Company Fund. Mr. Gainey functioned more as an analyst for the team. Ms. Sherman said, and will not be replaced directly.
Turner also beefed up its fixed-income capabilities with the hiring of Roger Early, portfolio manager and chief investment officer for fixed income, and Paul Matlack, a portfolio manager. Both are high-yield specialists and will help to develop a new core-plus strategy, Mr. Kneeley said. Jim Midanek had been CIO and remains on the team as portfolio manager.
Mr. Early was vice president and senior portfolio manager at Rittenhouse Financial Services, Radnor, Pa. Laurel O`Brian, a spokeswoman for Rittenhouse, said Mr. Early's duties had been assumed by other team members. Mr. Matlack was a portfolio manager at Delaware Investments, Philadelphia, until he left in the third quarter 2000, said Tom Gariepy, a spokesman for Delaware. Mr. Kneeley said Mr. Matlack had to wait for a non-compete agreement with Delaware to expire before taking another job.
Turner also forged distribution agreements with two mutual fund companies. Turner wholesalers now will market three mutual funds from the C&B Portfolios, managed by Cooke & Bieler Inc., Philadelphia - the C&B Large Cap Value, the C&B Mid Cap Value and C&B Tax-Managed Value funds. Turner sales staff also will market three growth equity mutual funds managed by Gardner Lewis Asset Management LP, Chadds Ford, Pa. - the Chesapeake Aggressive Growth, the Chesapeake Core Growth and the Chesapeake Growth funds.
The next step for Turner will be expansion into active international equities through a team lift-out or company acquisition, said Mr. Kneeley.
Finding and persuading talented managers to join Turner has become easier as the number of independent money managers dwindles, thanks to industry consolidation.
"We simply aren't for sale. Our investment banker, Goldman Sachs, is besieged by interested buyers, but I've told them only to come back to us with ideas that are really interesting," Mr. Kneeley said. And by interesting, he means clever joint venture deals and opportunities for strategic alliances, like that with Cooke & Bieler and Gardner Lewis, rather than an outright offer to buy Turner Investment Partners.
"Portfolio managers want to stay independent or want to achieve more independence than they can find in larger firms," Mr. Kneeley said. "One critical criterion for us is the cultural perspective: Will this portfolio manager fit into our firm? I can tell you that by Wednesday of the week that Roger (Early) and Paul (Matlack) came into the Berwyn office, people were already telling me, `hey, this guy is one of us."'
The "fit" of money managers into Turner is so important to the firm that many hires are made through recommendations from other employees. The Delaware Valley area around Philadelphia is home to many money management companies, and "friends-of-friends" referrals in the money management business are common.
Turner bond managers knew Mr. Early and Mr. Matlack from the days when they all worked together at Delaware Investments. Turner did not use an executive recruiter to hire their new bond managers, but did work with Marilyn Prince of PrinceGoldsmith LLC, New York, to find and recruit Mr. DiBella and Mr. Gainey from Aeltus. Ms. Prince likely will handle the search for an international equity team, Mr. Kneeley said.