Barr Rosenberg, founder of AXA Rosenberg, and Thomas Mead, research director, have left the firm's board of directors following an external review that concluded the two failed to act in accordance with company policies in handling a coding error discovered in June 2009, the quant manager announced June 30.
Clients had already been told that Messrs. Rosenberg and Mead would be leaving the firm eventually, but with the review completed, “we are accelerating the management and organizational transitions previously announced,” according to a client letter that appeared on AXA Rosenberg's website.
According to the letter, the review concluded that Messrs. Rosenberg and Mead “acted to limit dissemination of information regarding the error and to preclude discussion about its correction and communication at the proper levels in the firm.”
Agustin Sevilla, the firm's global chief investment officer, also was found to have failed to act in accordance with the firm's policies. Mr. Sevilla has stepped down as global CIO, but will move to a senior research role “as part of our organizational evolution” to better integrate the firm's once highly independent research center into the broader AXA Rosenberg organization, according to the letter.
“AXA Rosenberg's investment and research teams will now be organized around three core functions — research, investment models and portfolio management” — with each of those groups reporting directly to Global CEO Stephane Prunet.
Vice Chairman Kenneth Reid, who founded the firm with Mr. Rosenberg, and Kathleen Houssels, who had been serving as deputy CIO of the Americas, have replaced Mr. Mead as co-directors of AXA Rosenberg's research center.
Mr. Reid will also oversee the firm's long-term research activities as head of research, while Ms. Houssels will be responsible for day-to-day management of AXA Rosenberg's computer models in the new position of head of investment models.
Mr. Mead will assist with the transition of his responsibilities over the coming months, the letter said, with Mr. Rosenberg “available on an exclusive consulting basis,” at the discretion of Mr. Prunet.
The letter said the firm's regional CIOs — Gideon Smith, Europe; Kevin Chen, Asia-Pacific; and Bill Ricks, Americas — will continue to run AXA Rosenberg's portfolio management operations, with Mr. Ricks overseeing investment implementation globally until a replacement for Mr. Sevilla can be found.
AXA Rosenberg continues to work to strengthen and improve “our controls and risk management policies and procedures," the letter stated. It said an external consultant has been retained to review the firm's software change control process and related protocols. In addition, the firm said it is poised to appoint a senior chief risk officer with extensive investment experience.
The latest moves come after a number of institutional clients terminated the firm within a month and a half of AXA Rosenberg's initial April 15 admission of a botched response to the coding error. The firm reported $41 billion in client assets as of May 31, down from roughly $62 billion as of March 31.
Its latest letter, co-signed by Messrs. Prunet and Reid and vice chairman Dominique Carrel-Billiard, said the firm, with the help of external experts, is continuing to study whether the coding error resulted in any performance-related losses for clients. “This process will extend through the summer, particularly for more complex or customized accounts,” the letter said.
Efforts to reach Messrs. Rosenberg, Mead and Sevilla were unsuccessful.