A botched response to a computer glitch could prove be a body blow for AXA Rosenberg Investment Management, a quantitative firm that was already suffering heavy client defections due to weak performance.
In a highly unusual move, the company, in an April 15 letter to clients and consultants, said Barr Rosenberg, chairman of AXA Rosenberg Investment Management, will take a leave of absence because of a flubbed response by company executives to the discovery of errors in the computer programs running the firm's investment strategies.
The company is investigating why what it called “coding errors” in its quantitative programs discovered in late June and fixed in mid-November were apparently not reported to AXA Rosenberg's top executives for months thereafter.
In the April 15 letter, Stephane Prunet, AXA Rosenberg's global CEO, and William E. Ricks, Americas chief investment officer, said Mr. Rosenberg had agreed to take a 30-day leave while the company's board conducts a “full review” to determine why senior investment officers didn't follow guidelines calling for the issue to be reported in “a complete and timely manner.”
A day after receiving the letter, investments consultants said they're still working to come to grips with the facts of the matter — including who exactly slipped up and what impact those coding errors had on AXA Rosenberg's performance.
Opinion remains sharply divided among consultants on how serious an issue this could prove for AXA Rosenberg, with some predicting only minor fallout but others saying the firm could lose a considerable amount of credibility - and business.
One investment consultant, who declined to be identified, cited Santa Monica, Calif.-based Wilshire Associates Inc. as among those most concerned. Lawrence E. Davanzo, Wilshire's president, declined to comment.
AXA Rosenberg's letter noted the difficulties in determining whether investment performance had been affected by the error.
“We have engaged external experts to conduct a comprehensive and objective assessment, with the full support of our team,” it said.
Investment consultants and clients said last week's news comes at a difficult time for the Orinda, Calif.-based firm, which had seen a pickup in performance recently following a stretch of weak results that contributed to heavy outflows in 2009.