Legg Mason Inc.'s acquisition of QS Investors LLC spells the end of Batterymarch Financial Management Inc., the 45-year-old Boston-based quantitative equity manager that many saw as a pioneer in its field.
Through this deal, Batterymarch — formed in 1969 and purchased by Legg Mason in 1995 — and another Legg subsidiary, Legg Mason Global Asset Allocation LLC, will be integrated into QS Investors and use the QS name. New York-based QS also is a quantitative equity shop.
For many former Batterymarch executives, it's a bittersweet end of an era. In particular, co-founder Dean LeBaron told Pensions & Investments he is “saddened” to hear the name will disappear.
“When I sold Batterymarch to Legg Mason, I assumed I was selling something that would continue on beyond me,” said Mr. LeBaron, 80, who left Batterymarch when he sold it to Legg Mason and is now CEO of his personal investment firm, Virtualquest Co., in a telephone interview.
He co-founded the firm with Jeremy Grantham, now co-founder and chief investment strategist at Grantham Mayo & van Otterloo LLC, and Richard Mayo, co-founder and chairman of Mayo Capital Partners LLC, both in Boston. Mr. Grantham declined to comment; Mr. Mayo did not return a phone call seeking comment.
Said Lawrence S. Speidell, a former portfolio manager at Batterymarch and now chief investment officer of Frontier Market Asset Management, La Jolla, Calif.: “I think Batterymarch represents a milestone that was so far ahead of the path that most investors were taking. That milestone represented the first quantitative investment approach, the invention of basket trading. It represented the best of our industry.”
For Mr. Speidell, who worked at Batterymarch from 1984 until 1994, the company was more than a quant business. He remembered Mr. LeBaron taking potential clients to China and Latin America to see what was happening in those emerging markets. He recalled Mr. LeBaron and AT&T Investment Management Corp. CEO Robert Angelica going to Moscow in 1991, when Mr. LeBaron was contemplating launching a Soviet fund.
“Dean was always looking for the next idea. He was really obsessed with doing things differently,” Mr. Speidell said. “When index funds reached their general popularity, Dean abandoned them. When he felt that markets were more efficient, he developed an international strategy.”
Mr. LeBaron himself said: “I would prefer to be first than best.
“First was easier to select. We were always looking to fill that unfilled niche.”
“Batterymarch was a pioneering firm in the quant era,” said Michael J. Clowes, retired editor of P&I and now editor at large. “It's unfortunate that it'll be no more. It's a part of history.”
Mr. Clowes noted Batterymarch was one of the first independent investment counseling firms in the industry, and Mr. LeBaron was part of the avant-garde in predicting the essential role computers would play in the industry.
“In the 1970s, Dean was way ahead of the way most people thought about computers and technology,” he said, remembering a presentation Mr. LeBaron gave at a P&I conference that decade, using a computerized voice to emphasize his point.
Claudio Brocado, a Batterymarch senior portfolio manager from 2005 to 2013, said in an e-mailed response to questions that he thought the firm had “a wonderful culture.” He said it was a “well-oiled machine” and it's a “pity to let it all go away.”