CLEVELAND — Eighteen months after getting a new leader, Victory Capital Management has fewer people, more assets and a tighter focus.
In an interview, Robert L. Wagner, Victory's president and CEO, said his firm is poised to benefit this year from extensive restructuring in 2005, which was fully backed by KeyCorp — the Cleveland-based bank that owns Victory.
Since Mr. Wagner joined in June 2004, Victory has sold or closed strategies that showed little promise of long-term outperformance, including a Cleveland-based growth equity strategy; the firm's real estate fund; and Victory SBSF, the New York-based Spears, Benzak Salomon & Farrell value equity shop that KeyCorp bought in 1995.
Victory's head count dropped to 220 from 340 along the way, Mr. Wagner said.
The $56 billion in assets the firm managed at the end of 2005 was $2.5 billion higher than the year before, despite the loss of roughly $1.5 billion in Victory SBSF retail money, said Mr. Wagner.
At the same time, Victory has added resources to remaining strategies, while looking to acquisitions and lift outs to fill product gaps.
The firm hired Craig E. Ruch and Brent Zimmerman from Credit Suisse Asset Management in April and September 2005, respectively, to rebuild its corporate bond team. It also plans to add research analysts for Victory's Cincinnati-based small-cap value equity strategy, Mr. Wagner said.
On a larger scale, the firm's Jan. 13 decision to acquire Austin, Texas-based Austin Capital Management, which manages roughly $900 million in institutional hedge fund-of-fund money, filled an important hole, Mr. Wagner said. The only remaining gap now is international equity, with Victory actively looking to lift out a team, he said.
Consultants have welcomed Mr. Wagner's efforts to build a high-conviction investment house, but for some, Victory's bank affiliation is a strike against the firm.
"All the banks fight this problem" of holding on to top-flight investment talent, noted Richard Veres, a principal with Cleveland-based Highland Consulting Associates Inc. The cultural differences between banks and money management firms make issues such as compensation a source of tension, he said.
Historically it has been difficult for the typical public bank, with its short-term financial focus, "to get in synch with the biorhythms of an asset management firm," agreed Alan Johnson, managing director of New York-based compensation consultant Johnson Associates Inc.
Difficult, but not necessarily impossible. Stephen J. Kneeley, chief executive officer of Ardmore Partners, an Radnor, Pa.-based independent institutional investment management firm, said a bank-owned money manager isn't predestined to fail "if you have the right owner" — willing, among other things, to allow for a fairly independent compensation structure.
Mr. Wagner said KeyCorp fits that bill. The Cleveland-based bank has been "terrific," backing his efforts to craft a new compensation plan "different from anything put in place before" at Key, while providing resources and support to push through Victory's restructuring. It's "being able to run our business like a separate business, but being able to use all the resources" of the parent company, he said.