Jude Driscoll is not your typical money management chief executive. With a background as a fixed-income portfolio manager, the Boston native is not cut from the same cloth as other CEOs, many of which have sales and marketing or equity management backgrounds. As the leader of the fixed-income team that joined Delaware from Conseco Capital Management three years ago, Mr. Driscoll now finds himself as the head of a firm in transition. In an interview with Dave Kovaleski, Mr. Driscoll had no comment on persistent rumors that Delaware is on the block. But he would talk about filling former CEO Ed Haldeman's shoes and the direction of the company.
Q What led you to join Delaware?
A When I graduated from college (University of Pennsylvania), I went to work at Conseco Capital Management in Indianapolis, where I was a portfolio manager for the high-grade portfolio. Over time, I wanted to get back to the East Coast, and Goldman Sachs called about a utility trading job in Manhattan...which was an invaluable experience. Then I went to Bank of America, which at the time was NationsBank, to help them start a high-grade business.
After two years, Conseco had a job they wanted me to take so I took the job and moved back to Indianapolis. It was a great situation, a lot of really good people and very good money managers. Everything was clicking.
The problem was that Conseco had difficulties from the corporate side (the insurance company) and it started to affect our ability to market ourselves and to bring in money.
At just that time, Delaware was looking for someone to enhance the ability of their fixed-income team. What Delaware and Ed Haldeman were doing was creating a money manager built on original research, and it fit with what Conseco was doing. So I and 25 people left Conseco to join Delaware.
Q Why leave en masse?
A It was the ability to move with the group of people you knew you could have success with. There was comfort in that. One thing that was amazing: 14 of those people never saw Philadelphia before they started working there. They just said, "Let's go."
The driver was, things were going on with the parent. So, does the team splinter or does the team stay together? We said to each other as a group that we're much better together - it would have been a travesty not to stay together. Easier said than done, but it all kind of came together.
Q What was your strategy?
A We came here and there was an amount of streamlining we needed to do. What we did was stock Delaware fixed income with motivated, very smart people to run the portfolios for our clients.
There were three areas of fixed income - high yield, high grade and municipals. Municipals were the easy one. They had a very good process, good managers and good numbers. So I left that alone.
High-grade managers had good ability, were good portfolio managers, but they didn't have the resources to look at the whole market - they were more narrowly focused. What we did there was enhance it. They go from two research people to 19 research people, from one trader to four. What we did was really round out that high-grade story.
The last piece is high-yield. High yield was a complete do-over. We brought in new portfolio managers, new research staff. I think they (the managers that were replaced) were good at what they do, they were just snakebitten by the market. If it takes us a little longer to get high yield on the map because we're starting with a clean slate, that's what we have to do.
Q What made you decide to take the CEO job?
A It was really about the stability issue. It was important to have someone from the inside. Did I envision myself ever being in this position? No, I looked at it as something that I felt was best for the firm.
Q How did Ed Haldeman influence you?
A He was a very good person to...make people feel very good about working at Delaware. Everybody feels good now about the place they work, and I'm not sure that was the feeling before. He put pride in the institution, and made the portfolio managers feel good, but put enough pressure on them to make sure they performed. Then he started to get out and tell the world about what Delaware was doing. He's got a gift.
Q Is it difficult for someone with a fixed-income background to lead a firm with primarily equity assets?
A Having a portfolio management background helps dealing with the other managers because you talk the same language. It also helps to go out and talk about what is going on in your market when you're out selling the firm. Distribution on the institutional side is a little different now. What people are looking for is results and discipline within a style. By having a portfolio manager in there, it sends a message - that's what we are about.
Q What is your strategy now?
A To make sure we are focused. We know we're good at what we're doing as far as portfolio management, so now we want to focus the business around that. I don't want to be all things to all people. ...Too many people try to get into too many things and it hurts them.
Over the last three years, Delaware has been very stringent on its expenses. So what that says is that in difficult times we were able to keep the good people in place without having across-the-board firings.
The other thing is, all of these portfolio managers are competitors. So on a month-to-month basis, they are looking at themselves vs. all of the other portfolio managers out there. On a relative basis, they're doing well. Then you add that they had positive net flows. 2002 was the first time in 13 years that Delaware had positive net flows. It feels pretty good right now, people feel good about themselves.
Last year, the flows were for the most part institutional. If you have performance and a disciplined process, the institutional market is going to come to you, because they do the due diligence.
Q Any restructuring or new initiatives?
A We're not looking at any cutbacks and layoffs. We will always look to take advantages of situations as they arise, but we're not actively looking to fill any positions.
There is some streamlining of our fund lineup that we need to do. I'd love to have more distribution overseas. That's down the line. We'd look at more of an alliance than an acquisition. If we can create alliances, that would be very beneficial to us. We're not looking at anything on the acquisition side. If you have the performance numbers, people will come to you.
Jude T. Driscoll, president and chief executive officer, Delaware Investments, Philadelphia.
Assets under management: $87 billion
Performance (according to PIPER as of Dec. 31): Return (benchmark)
Core fixed income (1 yr.): 10.1% (11.0%)
Product name (3 yr.): 10.5% (10.4%)
Small-cap growth (1 yr.): -19.0% (-30.2%)
Product name (3 yr.): -13.1% (-21.1%)
Large-cap value (1 yr.): -13.7% (-15.2%)
Product name (3 yr.): -2.0% (-5.1%)
Benchmarks (respectively): Lehman aggregate; russell 2000 growth; russell 1000 value