“Money managers have big egos, and the key to success is to manage those personalities,” said Blair Thomas, CEO of EIG, Washington, which was involved in its own legal battle with TCW until last week over the Carlyle acquisition. “The inability of senior TCW officials to do this was a management failure.”
Mr. Thomas said his and other investment teams that left might still be at TCW if management had not created an antagonistic work environment.
Marc Stern, former TCW CEO and longtime top official, declined to comment.
The responsibility of growing TCW while changing its culture now falls on David Lippman, who has been TCW's president and CEO for five months. Mr. Lippman is the former CEO of Metropolitan West Asset Management LLC, a money manager acquired by TCW in December 2009 to replace Mr. Gundlach. Mr. Lippmann said he plans to meld various investment groups that haven't always cooperated in the past to unify the firm and build its business.
“My vision and what we are in the process of doing now is to demolish the silos that existed,” he said in a recent interview. “There were independent businesses all housed under TCW's roof or name, and what started a few years ago is a process designed so that the people at TCW work shoulder to shoulder in pursuit of the same goal.”
Mr. Lippman should be helped by a new structure that increases employee ownership of the firm to 40% from the current 17%. Two Carlyle funds will own the remaining 60% of TCW.
“Nothing aligns people's interests to work together better than having economic ownership of each other's businesses,” Mr. Lippman said. “This is a really important mantra: we all want to drink from the same fountain.”
The issue of employee ownership had been a bitter topic among TCW employees angry at Societe Generale for not giving them stock; the French bank relented somewhat and granted stock to 160 employees in February 2010. Sources said Mr. Stern was responsible for the stock distribution and had pushed Societe Generale on the subject for several years.
“We see the strong potential of TCW being unlocked by incenting investment managers to stay as long-term owners,“ said Olivier Sarkozy, a Carlyle managing director in New York and head of its global financial services group.
Mr. Sarkozy said Carlyle was interested in TCW because it sees a potential for growth that would allow it to compete better with larger players like BlackRock Inc. and Pacific Investment Management Co. LLC. “We are determined to grow the business,” he said.
But the new ownership structure is not benefiting everyone. Of the 150 TCW employees who now have stock in the company, only 50 are getting an additional equity stake, sources say. Top TCW management designated key portfolio managers and other managers as critical to TCW's continuing success and will concentrate the additional equity in their hands, sources say.
Disagreements over compensation led one equity team to leave last month and establish a new equity unit at Mr. Gundlach's DoubleLine Capital LP, Los Angeles. The group, led by Brendt Stallings and Husam Nazer, managed small-cap and midcap equities.
Komal Sri-Kumar, chief global strategist, left Dec. 31 to start his own macroeconomic consulting firm. He continues part time as a TCW equity portfolio manager.
Mr. Lippman won't discuss staff departures, but says more employees have been hired then have left in the last few weeks. Those new hires include Jess Ravich, group managing director and head of alternative products; Meredith S. Jackson, general counsel; and seven portfolio managers from Regiment Capital Advisors LP's special situations funds group.
TCW also announced in December that it partnered with hedge fund manager Scoggin LLC, New York, to create new distressed and event-driven hedge funds.
But the new alternatives efforts are small when compared to the $17.5 billion in assets Crescent Capital and EIG had raised when they were part of TCW.
TCW will no longer be entitled to lucrative incentive and management fees for future funds raised by EIG as part of agreement reached between the two firms last week stemming from the Carlyle acquisition. TCW's contract had required EIG to split fees until 2020.