Turner Investments LP, suffering from poor performance and client and staff defections, has lost 74% of its assets from its peak in 2010. But Stephen J. Negrotti, the Berwyn, Pa.-based money manager's new president and CEO, has a plan to pull the firm out of its tailspin.
Mr. Negrotti plans to improve the performance of its flagship growth equity strategies, launch new investment strategies, and hire additional sales staff. He joined the firm in May following a stint of more than two years as an adviser to Turner.
“The goal is to get costs under control, take stock of where we are, consolidate product lines and launch new products,” Mr. Negrotti told Pensions & Investments in a telephone interview.
Assets under management have been in a nosedive. Turner had $4.4 billion under management as of April 30, down from $8.3 billion just four months earlier and plummeting from more than $17 billion as of Dec. 31, 2010, according to data from the company and eVestment, Marietta, Ga.
Several senior executives and portfolio managers left during the last nine months, including:
- Matt Glaser, chief of investment strategies and executive managing director, who now is a managing director at New York-based Lazard Asset Management LLC;
- Tom Trala, executive managing director, chief financial officer and chief operating officer, who is now managing director, corporate development, at Franklin Square Capital Partners in Philadelphia;
- James Wylie, chief marketing officer and executive managing director, who became head of North American distribution and client services at Newton Capital Management, New York;
- John Finnegan, managing director, client services, who is now senior vice president, head of institutional client service, at Philadelphia-based Delaware Investments; and
- Senior portfolio manager William C. McVail and lead portfolio managers Frank Sustersic and Vijay Shankaran, all of whom left to pursue other opportunities, company officials said.
When Mr. McVail left, he said in an e-mail that his departure was his own decision. Turner spokesman Tucker Hewes confirmed that some who left were let go, and others resigned. Mr. Hewes wouldn't detail individual reasons for departure.
Messrs. McVail, Glaser and Wylie declined to comment. Messrs. Trala, Finnegan, Sustersic and Shankaran could not be reached for comment.
Turner, which currently has 22 people on its investment team, is filling the gaps created by those who left. Peter Niedland was hired as a senior portfolio manager and global equity analyst to assume some of Mr. Sustersic's responsibilities. He had been a portfolio manager at Conestoga Capital Advisors LLC, Radnor, Pa.
Portfolio manager Jason Schrotberger has taken over Mr. McVail's duties; portfolio manager Michael Tung has assumed Mr. Shankaran's responsibilities. Turner also recently laid off 11 employees in operations, reducing the total staff to 54. None of those laid off was on the investment side. The performance and turnover issues have caused some Turner clients to flee.
On May 29, the $75 billion Minnesota State Board of Investment, St. Paul, approved terminating Turner, which managed more than $350 million in active domestic small-cap growth equities. Mansco Perry III, executive director, cited organizational changes as the reason.
On April 16, the same time Mr. Sustersic left, Litman Gregory Asset Management LLC, Larkspur, Calif., terminated Turner as one of four subadvisers to the $86 million Litman Gregory Masters Smaller Companies Fund. The decision was connected to Mr. Sustersic's departure, according to a news release. On Jan. 31, Litman Gregory also terminated Turner as subadviser to its $425 million Litman Gregory Masters Equity Fund. Turner managed 10% of fund assets. Katrina Birrell, institutional client services manager at Litman Gregory, did not return phone calls seeking comment.
A year ago, the $8.1 billion Missouri Local Government Employees Retirement System, Jefferson City, terminated Turner as a small-cap growth equity manager; the firm had managed $120 million in that strategy for the fund. In September 2012, the pension fund terminated the $110 million midcap growth equity portfolio Turner had managed.
Brian K. Collett, Missouri Local Government's chief investment officer, said both terminations were due to long-term underperformance relative to each benchmark. “There were no operational issues, it was just performance,” Mr. Collett said. “If the plane is in a nosedive and if the nose isn't pulling up, we're getting out.”
Mr. Negrotti acknowledged the asset drops and terminations are “a direct result of performance not being as good as it could be.”
“We need to get our performance back. I need to work with the portfolio managers to make sure they've got the resources they need to do the best job they can,” he added.
Turner's large-cap growth equity strategy returned 9.52% for the three years ended March 31, vs. 14.62% for its benchmark, the Russell 1000 Growth index,according to eVestment. The five-year return was 19.6%, vs. 21.68% for the index; for 10 years, Turner's large-cap growth strategy returned 6.94%, vs. 7.86% for its benchmark. Turner's midcap growth strategy returned 9.38% for the three years ended March 31, vs. 13.52% for its benchmark, the Russell Midcap Growth index. For five years, Turner's return was 23.71%, vs. 24.72% for the index. Turner's 10-year return was 9.15%, vs. 9.47% for its benchmark.
In global growth equities, Turner returned 7.81% for three years vs. 10.9% for its MSCI World Growth-GD index. For five years, the return was 18.63% vs. 18.76% for the index. The strategy was launched in 2005.
Mr. Negrotti is looking to improve performance by changing how investment strategies are overseen. Although Turner's analysts will maintain sector focus, they will now have teams dedicated to each strategy. For example, the small-cap growth portfolio manager will have a dedicated sector analyst team. “We feel the extra set of eyes and ears at the product level will better position us to outperform as the market swings back toward growth,” he said.
Mr. Negrotti has been meeting regularly with Turner's clients to make sure they know improving performance is among the firm's top priorities. Company executives also are looking to consolidate and combine some strategies while the firm is launching new offerings
In January, Turner partnered with opportunistic venture capital firm TomorrowVentures LLC, Palo Alto, Calif., to launch Genesis, which will invest in companies expected to go public within 18 months as well as companies that have gone public over the past 18 months. “It targets the sweet spot of private companies pre-IPO and public companies post-IPO,” said Robert E. Turner, co-founder and CIO of Turner Investments. The firm also plans to launch the Mara-Turner African investment strategy, another public-private hybrid that will invest in Africa-based companies that are either about to go public or recently went public.
Although it remains to be seen if performance improves, Mr. Negrotti is optimistic that he and others can bring back Turner's lost AUM. “I see Turner being bigger (and) hybrid products (like Genesis and Mara-Turner) becoming a greater percentage of our business.”