Consultants and analysts familiar with the deal see Mr. Griffiths' appointment as a signal to the industry that Aberdeen is trying to win back investor confidence in its fixed-income strategies which, like many of its peers, had suffered from heavy exposure to credit. The move also shifts decision-making power from Philadelphia, where Mr. Bartlett was based, to the U.K.
James Thorneley, group communications manager at Aberdeen, insists “there will be no change to the investment process.” Mr. Griffiths “brings experience and knowledge of managing global fixed-income platforms that can only be beneficial in coordinating and developing Aberdeen's fixed-income business,” Mr. Thorneley said.
“Clearly there's capacity for any business that touches anywhere near fixed income to expand its presence given the long-term increased allocation (by pension funds) to this asset class,” said David Heaton, former managing director and head of global asset management investment banking at Merrill Lynch. He announced earlier this month that he will join Deutsche Bank AG, based in New York, as managing director in the financial institutions group.
BNY Mellon Asset Management is another firm that restructured its fixed-income team. On Jan. 14, officials announced the launch of BNY Mellon Cash Investment Strategies, which was carved from two subsidiaries and has about $400 billion in assets under management. CIS combines Dreyfus Corp.'s money market and municipal cash capabilities with Standish Mellon Asset Management's short-duration fixed-income skills. “This allows for a bigger team with more horsepower,” Mr. Little said.
In June, the firm also launched Standish Workout Solutions, a firm that specializes in fixed-income asset dispositions and workouts. The new business has been gaining momentum globally following BlackRock Inc.'s March 2008 appointment by the Florida State Board of Administration to help stabilize and restructure the subprime exposure in its Local Government Investment Pool, which at the time had about $14 billion in cash.
“It's an area that's really done well for us,” Mr. Little said. “We take portfolios that have gone wrong and get them back into shape. ... For example, we might break it into pieces and then decide which parts should be sold off quickly and which parts would be worth holding” to maturity.
Others that have shored up their fixed-income capabilities include:
• AXA Investment Managers SA, Paris, which in December named Graham Nicol to the new position of head of credit ex-U.S., part of a broader reorganization. Three months earlier, Chris Iggo had been appointed chief investment officer within the fixed-income team's new structure built around investment themes, rather than product lines. “In order to allow the teams to achieve their full potential, we needed a structure which is best suited to the fundamental components of fixed income, namely interest rate and credit,” Theo Zemek, global head of fixed income, said at the time.
• Nomura Asset Management, Tokyo, lifted a team of eight from hedge fund Proxima Alfa Investments LLC to launch Nomura Global Alpha LLC, New York, in July 2008. NGA specializes in alpha-oriented fixed-income strategies. Leading the charge is Rajiv Sobti, CIO, who was formerly president and CIO of Proxima based in New York.
• DB Advisors, the institutional asset management unit of Deutsche Bank AG, which is building its fixed-income team — again. In 2005, Deutsche had sold the bulk of its fixed-income business to Aberdeen, only to rebuild capabilities by luring a Louisville, Ky.-based fixed-income team from Invesco in 2007. Officials from DB Advisors declined to comment, citing ongoing legal issues over the Invesco hires. However, other fund managers say DB Advisors has been expanding in 2008, adding key personnel such as consultant relationship managers to push its fixed-income strategies.
The liquidity crisis “caught many managers cold,” Mercer's Mr. Cavalier said. Some money managers had been using models that ultimately failed because “the recent crisis overshadowed all of (the other crises in recent history) by significant amounts,” resulting in an unprecedented pace of widened spreads in both speculative-grade debt but also investment-grade debt. Credit markets have substantially repriced, resulting in huge losses for many managers.
“All fixed income is essentially betting against government credit; you're looking for improvements over government credit,” said Kevin J. Pakenham, managing director at Jefferies Putnam Lovell based in London. “However over the last 18 months, nothing has performed better than government credit, which is why there has been such a wide spread of underperformance against indexes. That's because indexes are dominated by government credits.”
According to a report, “Changing Trends in Credit Asset Management,” from Fitch Ratings, the collapse of the credit market in 2008 will lead to a return to a more traditional buy-and-hold fundamental approach.
Mr. Pakenham added: “It's wise to believe that equity can't move until the credit market is fixed. Therefore it's probable that the importance of fixed income to the investment management industry will continue to rise. ... The need for a strong fixed-income team has been intensified by the events of the last year.”