RYE BROOK, N.Y. - Axe-Houghton Associates Inc. will become more involved in active management and plans to add more investment vehicles and services under its new chief investment officer.
The company is in negotiations to acquire a trust company, and also is considering acquiring mutual funds and another money manager to supplement its products, said J. Richard Walton, who joined the firm Sept. 6.
Mr. Walton, former chief investment officer of Wertheim Schroder Investment Services, New York, has assumed the investment responsibilities of Seth Lynn, who remains president and chief executive officer of the company. Mr. Walton said Mr. Lynn has been well known in the industry on the passive management side, while his own experience has been in building up money management operations and building investment teams.
William Smethurst, chairman of Wertheim Schroder Investment Services, will assume the position of chief investment officer, which he had held from 1988 to 1992. The transfer will be seamless, said Tony Coelho, president and chief executive officer. Both men have very similar investment styles, so there will be no noticeable changes, just as there weren't when Mr. Walton joined the firm, he said.
"I'm building an operation here with the idea that no single individual is critical to the operation. ... Our bench has some depth to it, decisions are made by committee, and we want this done in a way that nobody including myself is critical," Mr. Coelho said.
Axe-Houghton, meanwhile, is seeking to broaden its traditional lines, which include passive management and small-capitalization equities, and will be adding staff, said Mr. Walton. The company manages $1.3 billion in institutional assets, nearly all tax exempt, he said.
Some additions could include large-capitalization equity, core fixed-income and high-yield products - to which Mr. Walton had good exposure during his tenure at Wertheim Schroder - as well as non-traditional investment products. As an example, he noted a bankruptcy fund he helped put a together at Morgan Grenfell Capital Management Inc., where he was chief investment officer from 1986 to 1990.
The fixed-income product could be the first addition, said Mr. Walton. Axe-Houghton is in talks to acquire a small fixed-income shop with less than $100 million under management, and Mr. Walton said the firm has looked at least at one mutual fund complex, a purchase which would give Axe-Houghton additional offerings in both the retail and the 401(k) markets.
A trust company also has been identified as an acquisition target, and negotiations are under way, said Mr. Walton. The acquisition of the trust company, which has between $100 million and $500 million in assets, would be a play for the high-net-worth individual market, said Mr. Walton.
"It's not final, but if it was a football field, we'd be in the 30-yard line," he said.
The balance sheet of Hoenig Group Inc., Axe-Houghton's parent, has $35 million to $40 million in cash to finance prospective acquisitions, he said.
Meanwhile, sources expect a migration of Wertheim Schroder personnel to other firms, following the acquisition of the remainder of the firm's equity by Schroders PLC. Sources speculate management personnel, unable to get equity in the firm as part of their compensation, will defect to firms where they can acquire a stake.
That situation is being addressed through a new incentive package now being put together by Schroders, said Wertheim Schroder's Mr. Coelho. The compensation package of salary and bonuses based on Wertheim Schroder's results will remain the same, but the long-term incentive program that included Wertheim stock will be replaced, he said.
Schroders does not give its equity to people outside Britain, so the new package will not include equity in the company, but it will be competitive, he said.
"They're long-term players. ... They want to maintain the key personnel we have here," said Mr. Coelho. "We will be competitive with everybody else on the Street. As we move forward and develop value, it will develop into more compensation to our people."
Mr. Coelho also expects to add staff as more assets are added. The firm probably will add an investment professional next year to work under Mr. Smethurst in the equities area, and might add more personnel in fixed income.
As for his own employment prospects, Mr. Coelho dismissed newspaper reports speculating on his possible return to Washington (the former California Democratic congressman is serving now as special adviser to the Democratic National Committee and the White House).
"People, because they recognize me as a political animal, have a hard time understanding how I could resist the siren song of government," said Mr. Coelho.
Mr. Coelho said he plans to stay on and continue to grow Wertheim Schroder's asset base. The firm already has added sufficient offerings to compete, including a wrap-fee program started in March, a mutual fund started at the beginning of the year, and Wertheim Schroder Consulting, its consulting arm aimed at small and midsize sponsors.
"At this point, my table is pretty well set," he said. "My point now is to put food on the table."