Credit Suisse picks new team to run its high-yield strategy

NEW YORK — Five months after losing seven people from its high-yield fixed-income team to HSBC Halbis Partners, Credit Suisse Asset Management has assembled a new group of portfolio managers and analysts to manage the strategy.

Martha Metcalf, former managing director and head of global high-yield bonds for INVESCO, Atlanta, began work as lead high-yield portfolio manager at New York-based CSAM on Aug. 29, said Dennis Schaney, managing director and head of global fixed income.

Ms. Metcalf will oversee a team that includes analysts Michael Plancey and Erik Brovig, who came from Blaylock & Co. Inc., New York, and UBS AG's Stamford, Conn., office, respectively. Katie Neff, formerly an assistant trader for Credit Suisse First Boston, New York, will be an assistant trader on CSAM's high-yield team, while GreyHarris will remain on the high-yield team as a trader.

"Our plan in high yield, even before the previous team left, has been to have a more integrated team that would allow us to utilize high yield in other areas of fixed income," said Mr. Schaney.

"The departures allowed us to restaff with people of like minds," he said, noting the firm's core-plus and target-return strategies could benefit from more "active" relationships with the high-yield team.

To help integration with CSAM's other fixed-income teams, Garland Hansmann, London-based head of European credit research, will cover both overseas high-yield and investment-grade fixed income. Mr. Hansmann will work with Stephen Hargreaves, who joined the firm earlier this year from ISIS Asset Management PLC, London, as a credit analyst, but now will be an analyst for the high-yield team.

The team that left CSAM in April was led by Richard Lindquist, former managing director and head of high-yield strategies. Mr. Lindquist and six other CSAM analysts and traders joined HSBC Halbis, New York, a unit of HSBC Asset Management.

Mr. Schaney said CSAM executives considered hiring complete high-yield teams from other firms to replace the former team — five separate teams contacted CSAM within 24 hours after the departures were announced, and he talked to two others later.

But Mr. Schaney said CSAM elected to build its own team because of Ms. Metcalf's extensive high-yield experience and because he wanted to further integrate high yield into existing CSAM fixed-income strategies. Mr. Schaney said Ms. Metcalf, who constructed a new high-yield investment process during her five years at INVESCO, "exactly fits the bill for what we're trying to achieve here."

Ms. Metcalf will oversee a portfolio that has experienced some recent performance problems, although its longer-term record is solid.

The strategy underperformed its benchmark, the Lehman Aggregate Bond index by 2.72 percentage points during the first six months of this year, according to Atlanta-based eVestment Alliance's database. But it exceeded the benchmark by 2.52 percentage points for the year ended June 30, and by 6.56 points over three years, according to eVestment Alliance.

CSAM also has suffered from an asset decline in the high-yield area.

"High yield has been a declining business for us, and we had not been growing during a time that other high-yield managers have doubled their business," Mr. Schaney said. He declined to elaborate.

The high-yield strategy had $1.4 billion in assets as of June 30, a 52% decrease from $3 billion a year earlier, according to eVestment Alliance. The bulk of the loss occurred in the second quarter of this year. Indeed, the firm lost at least $600 million that clients moved to HSBC Halbis after Mr. Lindquist and his team departed (Pensions & Investments, July 11).

Although CSAM officials didn't provide any data on assets under management in high yield, overall, its assets under management in the Americas totaled $25.6 billion as of March 31, down 31% from $37.2 billion a year earlier, according to CSAM.

Mr. Schaney said CSAM has consistently communicated with its high-yield clients about the changes to the portfolio management team, and has updated many on the latest hires.

"We've received favorable feedback on Martha so far," said Mr. Schaney, who added that many clients were comfortable during the transition period because of his background at New York-based BlackRock Inc., where he founded the firm's high-yield business. "And overall, the early signs from our clients are very favorable."

Bill Hensel, spokesman for INVESCO, said the firm is searching for Ms. Metcalf's replacement. The high-yield team, which manages $762 million, will report to Steve Johnson, chief investment officer of INVESCO's fixed-income strategies, until a replacement is named.