AXA Rosenberg will become a wholly owned subsidiary of AXA Investment Managers, and the director of the quantitative firm's research center, which has maintained a considerable degree of independence, will report directly to AXA Rosenberg's CEO in the future, according to a June 9 letter to clients and consultants.
The letter detailed an agreement under which AXA Investment Managers, which owns 75% of AXA Rosenberg, will purchase the remaining 25% stake held by co-founders Barr Rosenberg and Kenneth Reid.
In addition, Mr. Rosenberg will relinquish his authority over the research center and step down as chairman of the AXA Rosenberg board, while “continuing in his role as a consultant to the company on an exclusive basis, reporting directly to the CEO,” according to the letter.
Mr. Reid, meanwhile, will continue as a senior executive at AXA Rosenberg.
According to the letter, under the agreement, the economic interests of Messrs. Rosenberg and Reid will “continue to be tied to the success of the firm and the investment performance achieved for our clients,” ensuring a strong alignment of interests.
The latest moves come in the wake of the harsh fallout AXA Rosenberg has suffered following an April 15 client letter, which revealed that a “coding error” in the quant firm's computer models had been discovered in June 2009 but, while fixed by November, hadn't been reported to AXA Rosenberg's board for months thereafter. Investment consultants at the time pointed to the high degree of independence maintained by the Barr Rosenberg Research Center as a possible explanation for the slip.
Since then, a number of investment consultants have advised their clients to terminate AXA Rosenberg. According to the money manager's website, it had $41 billion in client assets as of May 31, down 34% from more than $62 billion as of March 31.
In its latest letter to clients, Dominique Carrel-Billiard, the CEO of AXA Investment Managers, together with Messrs. Rosenberg and Reid expressed confidence that the moves announced June 9 “will establish a strong framework for AXA Rosenberg's organizational evolution and preserve the key attributes of its investment platform.”
In a separate letter, Stephane Prunet, global CEO of AXA Rosenberg, said the firm's efforts to determine whether investment returns had suffered as a result of a coding error should be completed “for several standard strategies” by early July, after which clients will be “informed of their account-specific analyses.” n
