WHV leaves its past behind in effort to meet growth goals of new leader

The new president and CEO of WHV Investment Management is intent on substantially growing the $14 billion San Francisco-based money management firm. To do so, however, he must prove he can meet his goal of attracting multiple new investment teams in non-traditional asset classes.

Andrew L. Turner's aggressive plan comes in the midst of other management changes at WHV, which before a name change last year was known as Wentworth, Hauser and Violich Inc.

Mr. Turner said his goal is to attract one to two specialized investment teams a year for the next three to five years in order to reach $50 billion to $100 billion under management.

That would be a big change for a firm that dates to 1937 serving the fixed-income needs of wealthy individuals. The money manager branched out to institutional clients in the mid-1990s after launching an international equity strategy. About half of its assets now are institutional.

WHV now has abandoned its roots entirely, axing its fixed-income business in favor of international, global and domestic small-cap equity strategies.

Mr. Turner took over in January, replacing Judith Stevens, who retired after 38 years. Ms. Stevens was president for the past 13 years, and was CEO as well during the four years before she retired.

Mr. Turner had been chairman of Northern Lights Capital Group, a Seattle firm he co-founded that takes capital stakes in boutique money managers and provides them with strategic support. This funding can enable investment teams to be “lifted out” from another firm or to start their own business. He remains a Northern Lights board member.

Another key change came in April, when W. Kurt Hauser, the company's executive chairman and former CEO, retired. He was the last person to leave whose name was part of the firm's old title.

The bulk of WHV's assets are in a $10.5 billion international equity portfolio, a $700 million global equity portfolio and a $2 billion domestic small-cap equity portfolio.

Two equity strategies have been dropped: domestic midcap, which had $12 million; and domestic large-cap growth, which had $10 million. The last fixed-income strategy — a $100 million short-duration bond portfolio — was dropped more than a year ago.

The changes, along with the decision to hire Mr. Turner, were part of a reassessment by officials of Laird Norton Co. LLC, the seventh-generation family-owned Seattle company that acquired WHV in 1994, said Jeffery Vincent, Laird Norton's CEO.

“The question we asked is, how do we remain relevant to our clients,” he said in a telephone interview earlier this month.

Mr. Vincent said Laird Norton officials wanted WHV to move into new areas and Mr. Turner's background helping investment firms grow made him a good fit for the job. He said Mr. Hauser was part of the effort in 2012 to bring Mr. Turner to the firm after Ms. Stevens said she was going to retire. He said Mr. Hauser also wanted to retire in 2012, but stayed on until Mr. Turner was settled in his job.

WHV has also seen some staff reductions.

The head count has gone to 50 from 60 this year through a combination of terminations and attrition. Those leaving included Jeffrey Romrell, an executive vice-president who served as a managing director of business development, heading the firm's sales and client relations efforts.

Mr. Turner said some of those who left did not fit into the plan to expand into more specialized equity asset classes, such as emerging markets, as well as alternatives.

He said he would aim to keep WHV at the $50 billion to $100 billion AUM level because beyond that, firms are difficult to manage and employees lose sight of putting the investor first.

Attracting multiple teams that offer specialized investment abilities won't be easy, said Janie S. Kass, managing director at Margolis/Kass Advisors Inc., a money management consultant in San Francisco. “It's quite ambitious, especially for a smaller firm.”

Ms. Kass said there's strong demand for specialized teams, and smaller firms are often at a disadvantage because they can't offer the larger distribution network a team might want. She said investment teams want to know that a firm has the capability to grow their strategy, because the money they ultimately make will depend on the amount of assets the strategy gathers.

Mr. Turner said he is in the process of doubling WHV's sales staff to 12. He also created a separate institutional team to serve existing clients. In May, he named Jessica Pickens to the new position of head of relationship management, serving institutional clients. Ms. Pickens had been a managing director in the client relations group at Janus Capital Management.

Mr. Turner said the new hires should take the firm back up to 60 employees by the end of the year.

The firm is also looking at a strategic partnership with a non-U.S. money manager for overseas distribution, he said.

Mr. Turner concedes it won't be easy attracting new investment teams, but his background at Northern Capital and before that, in investment and manager research at Russell Investments, should help.

He said the key to luring investment teams is offering positive work conditions and realizing that the intellectual capital of the investment teams can only be attracted, not held.

“You provide an environment for them that they find very attractive,” he said. “And that's not just money. You don't charge them 50 cents every time they want a Coke, you put a Coke machine right next to them and say "drink as much as you want' because the cost is trivial by comparison to how good it makes them feel to just do what they want when they want to do it.”

Mr. Turner said smaller firms, where there is less bureaucracy, have the ability to cater to the foibles and idiosyncrasies of investment team members. “The personality traits that make them good investors often makes them unusual people,” he said. “That ability, when billions are at stake, to make a decision and just move on, and not to lose sleep over it, that's an incredibly rare ability.”

Mr. Turner said he has capital commitments from Laird Norton to fund new investment teams; he wouldn't say how much. He also has developed a strategic partnership with officials at Northern Lights, who have agreed to help find and fund the acquisition of new teams.

But Mr. Turner also hopes a larger sales staff will attract new clients for existing strategies.

Clients for the international strategy include the $400 million Miami Beach (Fla.) Employees' Retirement Plan, which has $50 million invested, and the $600 million Miami Beach Fund for Firefighters and Police Officers, which has $32 million invested.

The investment consultant to the fire and police plan — Brendon Vavrica of Thistle Asset Consulting, Boynton Beach, Fla. — said WHV's long-term investment record has been solid, but performance has been up and down during the past four to five years. “It's two steps forward and one step backward for the international strategy,” he said. “On a relative basis, it hasn't been the smoothest ride over the last several years.”

Mr. Vavrica attributed the volatility to the fact WHV doesn't strictly adhere to the weightings in the MSCI Europe Australasia Far East index. Instead, portfolio managers might overweight or underweight a sector.

The strategy for the one-year period ended June 30 produced an 11% return compared with 18.62% for the EAFE benchmark, according to eVestment LLC, Marietta, Ga.

Longer term, the performance is mixed. For the three years ended June 30, WHV's international equity strategy beat the benchmark, with an annualized 10.55% vs. 10.04%, but for the five years it underperformed, with an annualized -3.74% against the benchmark's -0.63%

Mr. Vavrica said the volatility should be expected given the investment strategy. “We are confident that, overall, the manager will produce higher returns over the long run,” he said.