Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 Defined Contribution East
    • 2023 ESG Investing
Breadcrumb
  1. Home
  2. MONEY MANAGEMENT
October 01, 2012 01:00 AM

Carlyle's challenge

  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Roger Schillerstrom

    When talent and management come into conflict at a money management firm, they can create a toxic environment that threatens the firm's stability, investment performance and growth.

    That is what happened at TWC Group Inc., and it came to a head in 2009 with the firing of Jeffrey E. Gundlach, chief investment officer, and TCW's agreement to acquire Metropolitan West Asset Management LLC to fill the big hole left by his departure.

    Now Carlyle Group hopes to revitalize the firm, but it faces a number of challenges. Carlyle announced Aug. 9 an agreement to acquire TCW from Société Générale SA. Carlyle expects the transaction to close by the end of March 2013. It is a move that could strengthen the money management firm, depending on how well Carlyle deals with key issues at TCW. To succeed it will have to address governance, operations and financial issues, including employee incentives.

    If it can do so successfully, it may provide guidance for others in the financial service industry.

    Financial and management issues were flash points of the internal disputes between TCW and Mr. Gundlach, and eventually caused concern among institutional clients. Contractual and pay issues with Mr. Gundlach were never resolved when he was TCW's CIO, and wound up in a sensational trial.

    SocGen, while it was reported to have sold TCW to raise capital to meet banking regulatory issues, appears to have failed to provide oversight of TCW in financial management and organizational issues.

    As a result, Carlyle has rebuilding to do. TCW has $130 billion in assets, below the combined $140 billion it and MetWest had at the time of Mr. Gundlach's firing.

    In acquiring TCW, Carlyle took a risk of exposure because of the intense scrutiny it will face from institutional clients and potential clients and their consultants. TCW is a prominent money manager, well-known among major pension funds and other institutional investors, some of whom are TCW current, former or potential clients. Some of these investors also invest in the two Carlyle funds that acquired the TCW equity, and even might be investors in Carlyle stock.

    Few businesses are required to produce the statistical data and organizational detail that clients and investors use to analyze the performance of money managers. As a result, clients and investors should subject Carlyle's oversight to intense analysis.

    The deal will come under scrutiny from the money management industry as well because of its intense competitive nature. Some competitors will likely attempt to recruit talent from TCW. That will raise the stakes in keeping and acquiring talent.

    Building a stronger organization is one of the key elements necessary to strengthen the company.

    In their criteria for selecting money managers, pension funds generally list at the top organization, structure, personnel, assets under management, resources and investment process. From these elements, when solidly in place, heightened expectations of good performance will flow.

    To retain its talent, Carlyle focused on raising the ability of TCW employees to increase their equity interest in the firm to 40% from 17% in return for signing long-term contracts that include lower salaries but larger stock grants.

    The move already appears to have had an effect. While TCW continues to negotiate with other equity team leaders, Craig Blum, group managing director of U.S. equities and portfolio manager of TCW's concentrated core equity strategy, agreed to a new five-year contract in exchange for increasing his equity stake in the firm while also receiving smaller up-front cash compensation, according to a report in Pensions & Investments.

    However, it's vital that the terms of the compensation, incentives and equity are clear to management and employees alike, something TCW appears to have failed to do with Mr. Gundlach.

    Clients and potential clients also must examine the employment contracts. They might spot ambiguities management has failed to see, and stave off the kinds of disagreements that harmed TCW.

    If Carlyle is successful, it could become an example for other private equity firms to seek out investment management firms whose organizations might need a makeover.

    Related Articles
    Carlyle, TCW management reach deal on acquisition
    Will Jeffrey Gundlach find his equity stars at TCW?
    One equity team signs with TCW
    WAMCO-Legg Mason spat could cause split
    TCW-Carlyle deal could be stalled by judge over EIG claim
    European money manager divestments still a hard sell
    Building a better index
    Despite NSA spying uproar, investors are loyal to Carlyle
    Recommended for You
    blackrock_symposium_1550-main_i.jpg
    BlackRock among top funds with exposure to Adani's dollar debt
    CPR Asset Management names head of research and strategy
    Sienna Investment Managers names head of ESG
    The Institutional Investor's Guide to ESG Investing
    Sponsored Content: The Institutional Investor's Guide to ESG Investing

    Reader Poll

    January 25, 2023
    SEE MORE POLLS >
    Sponsored
    White Papers
    Show Me the Income: Discovering plan sponsor and participant preferences for cr…
    The Future of Infrastructure: Building a Better Tomorrow
    Outlook 2023: Opportunity in a volatile world
    Research for Institutional Money Management
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 Defined Contribution East
      • 2023 ESG Investing