The second wave of money management cost-cutting has hit: Managers worldwide are eliminating funds and strategies or combining them with other offerings in an effort to pare costs further.
After the “first wave” of downsizing, which consisted primarily of bonus and staffing cuts, “now we are in the second wave,” which results in reductions in strategies and possible firm-level mergers and acquisitions, said Aymeric Poizot, Paris-based senior director in Fitch Ratings' Ltd. fund and asset management group at a June 16 news conference in London.
Managers that have eliminated or consolidated offerings include: Voyageur Asset Management, Legg Mason Global Asset Management, Capital International, Schroder Investment Management, HSBC Global Asset Management and Morgan Stanley Investment Management.
Minneapolis-based Voyageur Asset Management Inc. is eliminating its active U.S. large-cap and midcap growth equity strategies with total assets of $1.4 billion, $400 million of which was run for institutional investors. Minnesota State Board of Investment, St. Paul, will get back $30 million from Voyageur, which it will park in cash.
Michael T. Lee, Voyageur CEO, said the move was driven partly by cost. In jettisoning the strategies, which were run out of the firm's Chicago office, Voyageur will cut 30 jobs, 12 of which are investment professionals. Nancy M. Scinto, managing director and director of growth equity investments, and Jerold L. Stodden, managing director and senior portfolio manager, will stay with the firm through the end of the year, while the assets are distributed. Gordon Telfer, managing director and head of growth equities, will stay on board to help develop the firm's global asset management capabilities.
“Ultimately (the move) was driven by a strategic assessment of the strengths we felt would best align our (offerings) with the needs of our clients,” Mr. Lee said in an interview. Dropping the growth stock strategies, which were dominated by retail clients, effectively makes Voyageur institutional-only and allows the firm to refocus itself as the U.S. institutional platform for RBC Global Asset Management Inc., Toronto. As a result, the firm's strategies will be distributed globally, which Mr. Lee said will result in “significant asset growth” for Voyageur, which managed $35.3 billion as of March 31.