Despite those moves, some pension consultants predict Nicholas-Applegate could face difficulties holding on to many of its systematic clients.
One senior consultant who declined to be named said that while "quant firms have a better chance of holding onto some clients," because the quantitative aspects of the investment process are proprietary, the loss of so many key people certainly reduces those chances.
The head of research with another major consultant, who declined to be named, agreed, saying Mr. Nutt and his team had been the "brains" behind Nicholas-Applegate's systematic success.
The departure of Mr. Nutt and his colleagues points to the difficulty money managers face when one product line begins to stand head and shoulders above the rest as the firm's principal asset gatherer.
Mr. Nutt, a one-time accounting professor at Virginia Polytechnic Institute and State University, said Nicholas-Applegate's performance-focused compensation system had been "fair" when he began rebuilding a struggling systematic equity team in 1999. However, with systematic assets under management surging from $2.5 billion at the start of 2004 to just less than $6 billion today, that system seemed increasingly inadequate in keeping key team members from being lured away by competitors, he said.
Under the existing compensation system, even as "revenue goes straight up, compensation flat-lines," he said.
Mr. Nutt said he first approached Mr. Valeiras — the executive widely credited with leading the broader firm's turnaround in recent years — in August 2004, arguing that his team needed equity in the firm or revenue participation.
He conceded that Mr. Valeiras, whom Mr. Nutt credited with supporting the systematic team, was probably constrained in what he could offer. Nicholas-Applegate is owned by Allianz AG, which bought Nicholas-Applegate at the height of the growth equity mania in 2000. Since Allianz's purchase, Nicholas-Applegate's assets under management dropped to $13.7 billion as of the first quarter of 2005 from $45 billion, following the collapse of the growth equity bubble after March 2000.
Last summer, Mr. Nutt said, he warned Mr. Valeiras that without a superior compensation package, the systematic team would be in play. In October, the company offered the team a total compensation package of 25% to 30% of the revenue it generated, he said. But firm executives declined repeated requests to put that deal in writing, Mr. Nutt said.