JERSEY CITY, N.J. David Dreman is not retiring yet.
But over the last several months, the iconoclastic contrarian value manager has been busy overhauling the management team at his $22 billion money management firm, Dreman Value Management LLC, recently installing his potential heir apparent as CIO, as well as a new president and a new CEO.
Im not getting any younger, said Mr. Dreman, the firms 71-year-old chairman and chief investment officer, in an interview. I wanted to make sure that we have the people in place who can manage the firm for years to come.
Mr. Dreman said he has no plans to retire, but he appears to be grooming E. Clifton Hoover, a former large-cap and small-cap value portfolio manager at NFJ Investment Group LP, Dallas, as his eventual successor. Mr. Hoover joined DVM at the end of last year as a managing director and co-CIO on the firms flagship $18 billion large-cap value fund, along with Mr. Dreman.
Also, James Hutchinson, executive vice president and portfolio manager, was promoted to president and, earlier this month, Boris Onefater became chief executive officer.
These moves cap the end of a period of personnel transition for DVM. The firm added 18 new employees during the past 18 months, including several portfolio managers and research analysts. DVM also experienced notable turnover, with 11 employees leaving since the beginning of 2006. The firm currently has 47 employees.
Some of these departures included former President Thomas Littauer and former CEO Lloyd Jagai, who left the firm in April 2006. Mr. Jagai recently started a hedge fund with several former DVM employees, including former senior portfolio manager Nelson Woodard, according to sources who did not want to be identified. Mr. Jagai declined to comment.
Mr. Onefater said a portion of the turnover was initiated by firm executives to upgrade the overall management team and strengthen DVMs operations, compliance and marketing after some deficiencies were identified in those areas in the previous management team, he said.
Lawsuit an issue
Some of the turnover was also related to issues outlined in a suit that DVM filed last November against Aspen Computer Solutions, DVM officials acknowledged. The suit references a suspected security breach of the firms computer systems by former employees. DVM hired the technology consulting company in May 2006 to investigate the suspected breach but is suing ASC for allegedly causing damages to DVMs systems during its investigation.
DVM officials declined to comment further on the suit due to pending litigation.
Despite numerous personnel changes, the manager has added a significant amount of new business, increasing its assets under management by roughly 50% since the beginning of 2006.
And, the companys executives contend that as a result of adding a possible successor to Mr. Dreman and expanding portfolio management and research capabilities, DVM is now on a stronger footing for long-term growth.
The idea has been to put in a foundation that can take this firm to the next level, said Mr. Onefater, who joined DVM last June from Deloitte & Touche LLP, where he was a principal in the hedge fund practice. He added that clients had also been asking for an heir apparent to Mr. Dreman.
Mr. Onefater said the moves are all part of a strategy to increase the firms assets to between $30 billion and $40 billion during the next several years.
The majority of its growth has typically come through retail investors. The firm has capitalized on some key subadvisory agreements with distributors such as DWS Scudder Investments, New York, a division of Deutsche Asset Management, and Claymore Securities Inc., Lisle, Ill.
DVM officials are evaluating ways to increase the distribution of the firms investment strategies, in addition to its subadvisory relationships, in both the retail and institutional communities, Mr. Onefater said.
DVM executives also said they are incubating new quantitative strategies and are considering launching a global equity strategy in the near future.
The firm is also still recruiting several portfolio managers and analysts. Thats in addition to some of its recent hires, which include Mark Roach, a managing director and portfolio manager for small-cap and midcap equity strategies, and Peter Andersen, director and high-yield fixed-income manager.
Industry observers said building around Mr. Dremans style now with multiple investment professionals and enhanced distribution will ease any transition when or if he chooses to retire, and could keep the firm on steady ground over the long term.
He is one of the smarter value-oriented investors out there and, individually, hed be very difficult to replace, said Ted Disabato, CIO and senior consultant at Clark Strategic Advisors Inc., Chicago. But the longer the transition time, the better especially if it is almost transparent to the client.
And despite Mr. Dremans renown and unique contrarian style, some contend his approach can be carried on long after he passes the torch to his colleagues.
It doesnt matter how contrarian you may be, said Theodore Aronson, managing partner and founder of Aronson + Johnson + Ortiz LP, Philadelphia. If you have a disciplined and understandable style and your entire firm is not just based on one individual you should be able to build a firm that lasts well beyond that individuals mortality.