Embroiled in a high-profile lawsuit against TCW Group Inc. over allegations of gender discrimination and sexual harassment, former distressed debt manager Sara Tirschwell says long-standing practices among investment firms limit executives who aspire to strike out on their own.
Those constraints, she said, effectively bar investment executives from taking their track records with them — to find jobs or to start their own firms — and demonstrating their accomplishments to potential investors.
Legal experts say that's because the track record belongs to the firm; it is up to the manager to decide whether or under what circumstances departing executives can use their portion of the track record.
To be sure, such constraints affect all investment executives, not just women. But for women and minorities, it can be something of a Catch-22 — they often lack the seniority to negotiate the use of such records, and track records are required by most institutional investors to award mandates. Without a portable track record, Ms. Tirschwell joined TCW in 2016 after an earlier effort to strike out on her own fizzled.
"The issue of the track record is a really important issue," Ms. Tirschwell said in a recent interview with Pensions & Investments. "The big name brand firms won't let anybody take their track records. Pension funds have got to be willing to take that risk" to invest with new firms owned by women and minority investment executives who cannot present an audited track record from their prior firms for this reason, said Ms. Tirschwell, a former managing director of TCW's distressed debt strategy group.
If institutional investors continue to invest mostly with the big, brand-name alternative investment firms, she said, they will have more correlated returns. That's not necessarily a problem until they are not all doing well.
In Ms. Tirschwell's lawsuit, filed in January 2018 against TCW, Jess Ravich, her former direct supervisor at TCW, and David Lippman, TCW president and CEO, Ms. Tirschwell alleges she was fired in December 2017 after she had lodged a sexual harassment complaint with TCW against Mr. Ravich, then group managing director and head of alternative products.
The complaint, filed in state court in New York, seeks at least $30 million and punitive damages for unlawfully terminating her, breaching her employment contract and violating the New York City Human Rights Law, which bars discrimination on the basis of gender.
TCW, with $253 billion in assets under management as of March 31, has maintained in court filings and in written statements that Ms. Tirschwell's allegations are "without merit."
"Ms. Tirschwell was properly terminated as a result of repeated compliance violations," TCW said in a statement to P&I in May 2021.
"TCW is proud of its inclusive culture and has a zero tolerance policy for any form of predatory behavior," TCW said in a statement soon after Ms. Tirschwell filed her complaint. TCW added that with regard to Ms. Tirschwell's allegations, the firm had engaged an independent investigative firm to examine the allegations and determine the facts.
In 2018, TCW wound down the roughly $50 million distressed debt fund that Ms. Tirschwell had run, according to two letters to investors at the time. Her departure triggered a key-person event that gave investors the right to request a redemption.
A trial date on the lawsuit has yet to be scheduled.