PHILADELPHIA — Brandywine Asset Management executives have rapidly executed a number of major changes to the firm in recent weeks, adding a managing partner in addition to changing its name and relocating.
All three moves were made in response to Brandywine's accelerated growth in recent years, but they also were designed to position the firm for organic growth, company officials said.
Brandywine, which is a subsidiary of Legg Mason Inc., Baltimore, had $30 billion in assets at the end of February — up 63% from the end of 2004 and up 138% from the end of 2003.
Company officials decided to bring on a full-time executive to manage the overall business strategies and operations. Stephen Kneeley, the former co-founder, president and CEO of Turner Investment Partners, Berwyn, Pa., and Ardmore Investment Partners, as a managing partner. Mr. Kneeley will head all of Brandywine's non-investment-related businesses, including distribution, operations and business development.
For Brandywine, which has been run by a nine-member executive committee, Mr. Kneeley represents the first executive who will focus full-time on running these businesses.
The growth and the additional staff hired to handle it, also prompted the need for new offices, and Brandywine officially moved its headquarters to Philadelphia from Wilmington, Del., this week.
Brandywine also changed its name to Brandywine Global Investment Management LLC. With roughly 60% of client assets managed in global mandates and with more than 25% of client assets located outside the United States, officials for the firm said they wanted the new name to reflect that.
Considerable change
"Since the firm was founded 20 years ago, our business has changed considerably," said Adam Spector, managing director and head of marketing sales and client service at Brandywine. "We have entered into new markets and new investments and we have expanded dramatically."
Specifically, the firm has evolved from a traditional domestic large-cap value shop that managed assets for U.S. pension plans into a firm that manages global, international and alternative investment strategies for investors around the world, he said.
The firm's international value equity and global fixed-income strategies, in particular, have driven a significant portion of Brandywine's recent growth.
Brandywine managed $4.2 billion in its international value equity strategy at the end of 2005, up from $1.3 billion at the end of 2003. It managed $9.3 billion in its global fixed-income strategy at the end of last year, more than triple the $3 billion it managed at the end of 2003.
Both strategies have also delivered performance, with the international value equity strategy outperforming its benchmark, the Morgan Stanley Capital International Europe Australasia Far East index, by 7.22, 5.89 and 4.33 percentage points over the one-, three and five-year periods ended Dec. 31, according to the eVestment Alliance database. The EAFE index returned 13.53%, 23.69% and 4.56% for the respective periods.
The global fixed-income strategy has outperformed its benchmark, the Citigroup World Government Bond index (unhedged) by 4.91, 5.28 and 5.09 percentage points, respectively, for the same periods; the WGBI returned -6.87%, 5.7%, and 6.92%, respectively.
By bringing on Mr. Kneeley and moving into more spacious headquarters, Brandywine is now on firm footing for growth in these, as well as its other fixed-income, equity and alternative strategies, Mr. Spector said.
Mr. Kneeley left Turner Investments in 2004 to start his own institutional money management firm, Ardmore Investment Partners. Mr. Kneeley, who closed Ardmore earlier this year, said he was attracted to Brandywine because of its multiple investment strategies, its "distinct and separate investment teams," and its parent company, Legg Mason.
Mr. Kneeley said that early on, he will evaluate the firm's infrastructure to determine if it needs to be upgraded to match the firm's expanding product and client base. He also plans to review the firm's institutional, private-client and non-U.S. distribution efforts.
Lastly, Mr. Kneeley said he plans to examine Brandywine's integration with Legg Mason to see if Brandywine is fully taking advantage of its parent company's vast resources and how the firm can use the relationship to maximize growth.
Brandywine's relocation to Philadelphia will also play a critical role in its development, Mr. Spector added. After increasing its staff by more than 60% in the past two years, the firm's roughly 140 employees "no longer fit" in its Wilmington office. The new location will allow the firm to adequately house all of its employees and expanding technology and operations, he said.
He also said the firm plans to add more employees in the next several years, noting the Philadelphia location will allow Brandywine to tap "specialized talent" from places such as Princeton University, Princeton, N.J., and New York City.
While the firm plans for continued growth, it will focus on building the business organically, a strategy that will permit Brandywine to preserve its boutique culture. "We have never done an acquisition, nor do I imagine we would ever do one," Mr. Kneeley said.
