After suffering significant outflows, Systematic Financial Management LP, an affiliate of Affiliated Managers Group, is closing the investment strategies associated with its "catalyst value" discipline, according to various sources. In light of the product closure, the firm also plans to reduce its headcount, Systematic has told at least one investor client.
With $3.3 billion in assets under management as of March 31, Systematic's firmwide AUM has dropped precipitously from $14.3 billion at the end of 2013, Securities and Exchange Commission filings show. With the closure of its catalyst value product, which had $584 million in assets as of March 31 according to public investor documents, the firm is bracing for a further decline.
The $57 billion Los Angeles County Employees Retirement Association, Pasadena, Calif., was notified in April that "Systematic was closing its catalyst value equity product as outflows in that discipline, following the extended medical leave of the primary portfolio manager, had rendered the product unprofitable," a memo dated May 3 from the pension fund's investment staff to its board stated.
Ronald Mushock, a lead portfolio manager at Systematic, went on medical leave in late December, according to public investor documents.
Teaneck, N.J.-based Systematic is one of more than 30 affiliated investment boutiques in which AMG is invested. AMG had $778 billion in aggregate assets under management as of March 31.
Systematic and its parent AMG declined to comment via a company spokesman.
Systematic's catalyst value product is offered in large-cap, midcap, smidcap, small-cap and all-cap value strategies, according to the firm's most recent Form ADV, filed March 31 with the SEC. Catalyst value is one the firm's three investment disciplines, leaving its "free cash flow value" and "disciplined value" products, which Systematic will continue to manage.
In addition to LACERA, an executive at an investment consultant who spoke under the condition of anonymity said their firm was also notified in April that the catalyst value strategies were shutting down, and that investors had until the end of September to exit the investment.
LACERA has $225 million invested in a Systematic small-cap value mandate, which was not directly affected by the closure since it is in the free cash flow discipline. But because the catalyst value strategies being closed represent nearly 18% of Systematic's total AUM, LACERA's investment staff is monitoring the firm closely, as "it remains to be seen how the planned closure will affect the firm's culture, philosophy, investment process, and ultimately, its performance," the memo stated.
Jonathan Grabel, LACERA's chief investment officer, declined to provide further information but noted in a June email that Systematic "is not on a formal watchlist" for the pension fund.
As a result of the product closure, Systematic "plans to reduce its internal headcount to better align with remaining assets, focusing remaining team members on its two continuing disciplines, Free Cash Flow and Disciplined Value," LACERA's memo stated.
As recently as November, Systematic had 34 employees, including 13 investment professionals, according to board documents published by a former investor client, the $4.7 billion Fresno County Employees' Retirement Association.
FCERA terminated Systematic in January from a $75 million smidcap value mandate over performance and portfolio manager concerns, after Mr. Mushock, who ran FCERA's strategy, went on leave.