Embattled money manager TCW Group is giving top employees a 20% equity stake and is increasing fee-sharing arrangements with key investment teams as company executives attempt to put the Jeffrey Gundlach saga behind them, stabilize the business and attract new assets.
In an interview with Pensions & Investments, CEO Marc Stern said the compensation changes have enabled him to play a game of offense as he looks to grow TCW's business.
The changes follow the ouster of Mr. Gundlach, chief investment officer, in December. Within 10 days, Mr. Gundlach formed DoubleLine Capital LP, and 45 of his 60-member fixed-income investment team followed him.
As a result, Los Angeles-based TCW lost more than $18 billion in assets from clients terminating the firm, some of whom moved to DoubleLine.
The removal of Mr. Gundlach, who was involved in a dispute over control of TCW, also opened up a series of festering issues over employee compensation that had other teams threatening to leave.
“It was clearly a rough few months,” Mr. Stern said in an interview.
But Mr. Stern, in his first extensive interview since Mr. Gundlach's departure, sees rapid growth for his company. He predicted that TCW's current $115 billion in assets under management will double within four years through acquisitions, increased inflows and strong financial results.
If it happens, it would be quite a turnabout for the subsidiary of French banking giant Societe Generale S.A.
Mr. Stern, a former longtime president of TCW, was serving as its vice chairman when he became CEO last June.
He said what is important is that the company is moving forward. One key element: more money for some employees through an equity ownership plan. Mr. Stern said 175 of TCW's 700 employees — investment professionals, marketers and administrative staff — will be eligible for the incentive plan. That program, he said, will be “very useful in aligning people's interests with the overall interest of the company,” as well as lucrative for employees.
“Hopefully, we will make some people wealthy along the way,” he said.
Mr. Stern said Societe Generale executives understand the need for the equity program. “In relation to equity, the calculation that a firm like SG does is that if we motivate and incentivize our people, we keep the good people,” he said.
Jacques Ripoll, head of Societe Generale Global Investment Management & Services, Paris, said in a statement: “The new equity plan will serve to create an ownership culture at TCW and effectively aligns employees' interest with those of TCW and Societe Generale.”