LOUISVILLE, Ky. What appeared to be a team liftout at first is actually just the beginning for Deutsche Asset Managements fixed-income business.
After lifting out more than a dozen Louisville-based fixed-income employees from INVESCO Institutional at the end of March, executives for Deutsche Asset Management said the company intends to add more talent in the region and expand the business significantly.
We are planning to hub a very significant portion of the institutional fixed-income business in Louisville, said Kevin Parker, chief executive officer of New York-based Deutsche Asset Management, in an interview. The team we have hired is the foundation of the business; its a world-class team that we can build an institutional fixed-income business around. We like the team, we like the location, we like it all.
Deutsche is now officially opening an office in Louisville, its first presence in the city, to house the 13 Louisville-based team members hired last month from INVESCO, including three former global partners from INVESCOs worldwide fixed-income business Stephen M. Johnson, chief investment officer of the fixed-income group; Kenneth Bowling, director of fixed income and a portfolio manager; and James Guenther, director of global credit research. The trio helped to oversee roughly $94 billion in fixed-income assets at INVESCO.
The new office will also be home to the 10 other Louisville-based sales and support staff DeAM hired from INVESCO, as well as a number of additional investment professionals and support staff DeAM intends to add to the business. Deutsche executives anticipate that the operation will eventually house about 60 employees.
While DeAM is putting the infrastructure in place to support the business in Louisville, the company has begun recruiting locally to expand its investment capabilities and operations.
Mr. Parker said DeAM has already gotten an overwhelming amount of response from local investment professionals, including substantial responses from other current INVESCO employees interested in joining the new operation. Some senior INVESCO investment professionals, as well as some operational staff, are among those who have expressed interest in recent weeks.
Even though INVESCO filed a lawsuit last month against DeAM, claiming among other things that Deutsche had tampered with its business by hiring and negotiating with these employees, Mr. Parker said he would not be deterred from bringing additional INVESCO employees on board. We have a business to build, he said.
INVESCO spokesman Doug Kidd said there have been no additional departures from the Louisville office since the members of the fixed-income group resigned last month, and he added that appropriate retention agreements are in place to ensure continuity.
INVESCO has already taken steps to solidify a new leadership team in its worldwide fixed-income group, a move that consultants said should help stabilize the business. The leaders may be gone, but the implementers and operators are still there, which may be most important, said Michael Beasley, managing director of Strategic Investment Solutions Inc., San Francisco, which consults to four institutions using INVESCO for fixed-income portfolios.
To firm up its operation, INVESCO has named Karen Dunn Kelley a managing director at affiliate AIM Capital Management Inc. Houston, and director of AIM global and cash management as the new head of its worldwide fixed-income operations. Ms. Kelley selected two individuals Lachlan Callander, who will oversee international fixed income, and Greg Stoeckle, who will lead domestic fixed income and credit research as interim CIOs.
Possibly de novo
Mr. Parker said it is unclear just how much, if any, of the assets the INVESCO team might be able to bring over to DeAM when it joins the company.
Our plan was to start the business de novo if we had to, said Mr. Parker.
The team had previously run more than $40 billion in stable value assets, but Mr. Parker said stable value will not be the centerpiece of the new operation. The other real jewels here are the higher margin capabilities this team brings to the table, he said.
The new DeAM operation will be built around its core, core-plus, global and absolute-return fixed-income strategies, for example, filling gaps DeAM has had in its institutional fixed-income offerings. These gaps were created when the firm sold off parts of its U.K. business to Aberdeen Asset Management in 2005, including most of its active fixed-income team that was based in Philadelphia. Mr. Parker explained the Philadelphia fixed-income teams worked very closely with the U.K. teams that were sold, making it logical to package the two together. The decision to sell the business, he added, was not an indication that Deutsche chose to exit active fixed-income management.
Mr. Parker also said he wouldnt rule out moving other parts of DeAMs operations to Louisville. Its complementary with other fixed-income capabilities we have, and they are all pulled together through a single global system, he said. It doesnt matter if youre in Louisville, New York or Frankfurt, its all centralized.