BOSTON — Acadian Asset Management Inc., a fast-growing quantitative manager of international and emerging market equities, is adding another arrow to its quiver: emerging markets debt.
Churchill Franklin, executive vice president for marketing and client service, said in a recent interview that the firm has brought in John Peta, Marie Usumanu and L. Bryan Carter to launch an emerging markets local currency fixed-income strategy in the near future.
Previously, Mr. Peta helped manage $600 million in emerging market debt at Boston-based Standish Mellon Asset Management Co. LLC, where Ms. Usumanu was an analyst researching Eastern European and African markets. Mr. Carter was an associate economist developing economic and econometric models at Baltimore-based T. Rowe Price Associates Inc.
Mr. Franklin said Acadian’s latest initiative amounts to more of a “build” than a liftout.
The emerging market debt strategy that comes out this year will be more “fundamental” than Acadian’s current quantitative model-driven lineup, but the newcomers share an empirical approach and a commitment to continuously improving the investment process that should help them fit nicely into Acadian’s culture, he said.
Examples abound of money managers stumbling when they’ve tried to move beyond their core competence, but emerging market debt “feels relatively comfortable — a little bit stimulating and challenging,” said Mr. Franklin.
For one thing, emerging market bonds have “some interesting risk characteristics which, in some ways, makes them more equity-like,” said John Chisholm, Acadian’s chief investment officer. Moreover, inefficiencies in the local-currency debt market — a faster-growing, less-covered segment than dollar-denominated emerging market sovereign debt — provide the kind of scope for adding alpha that Acadian is always looking to exploit, he said.
In a separate interview, Mr. Peta said Acadian’s strengths at collecting and then slicing and dicing data will strengthen the mix of fundamental and quantitative tools he previously had at his disposal. The firm’s pioneering work on behavioral finance should provide another leg up in managing emerging market debt, he said.
Acadian executives said the fact that their emerging markets equity strategy has been closed for two years was an added incentive to explore emerging markets debt. Acadian’s emerging market equity strategy had $9 billion in assets under management at the end of 2006.
Even without taking new mandates for emerging markets equity, Acadian’s overall assets under management have continued to double or better for each of the past four years, ending 2006 at just more than $64 billion.
Mr. Franklin said the research Acadian did before deciding to pursue an emerging markets debt strategy showed pent up demand among both investment consultants and institutional clients, especially in Europe and Japan. Among U.S. investors, there’s more concern that the asset class’ strong run over the past few years will limit gains in the coming years. “We still like the asset category,” he said.
Mr. Franklin said three or four Acadian clients have expressed an interest in providing seed money for the emerging markets debt strategy, which should have capacity of around $5 billion.
Further down the road, as the ability to short in those markets improves, a long-short emerging market debt strategy could follow, Mr. Franklin said.
Acadian continues to explore other strategies where company officials feel there are market inefficiencies waiting to be exploited. The next candidates under consideration include a U.S. growth strategy and a currency strategy, Mr. Franklin said.
