Organizational changes at Galliard Capital Management Inc., a Wells Fargo Asset Management subsidiary with $78.2 billion in stable value assets under management, are raising concerns from one large client and an investment consultant.
Now that the remaining founding partners of Minneapolis-based Galliard are retiring from the firm, investors await clarity on whether a revenue-sharing agreement between the firm and its parent Wells Fargo will change, making key talent and client assets a potential flight risk, public investor documents reveal.
Last month, the North Carolina Supplemental Retirement Board of Trustees, Raleigh, placed a $2 billion stable value strategy overseen by Galliard on watch due to organizational changes.
North Carolina's 401(k) and 457 retirement plans had $11.8 billion in combined assets as of March 31, meaning Galliard's mandate represented around 17% of total assets in the plans.
The action was primarily prompted by a "lack of clarity" around Galliard's "ability to retain and incentivize their investment team," and concerns that Wells Fargo is "taking a more active role in the management of the firm," according to a June 3 memo by Loren de Mey, an assistant investment director for the supplemental retirement plans.
At Galliard, Karl Tourville, founding managing partner and president, will retire from the firm in June 2020. Richard Merriam, founding managing partner, and Carrie Callahan, managing partner and head of client service, will retire at the end of this year. And Leela Scattum, partner and chief stable value strategist, will retire by the end of 2020, according to company Form ADV filings with the Securities and Exchange Commission.
Additionally, according to North Carolina's memo, while Wells Fargo and Galliard have a revenue-sharing agreement, it will expire at the end of this year.
"With the revenue share going away, Wells Fargo has started to work on structuring a bonus pool for key investment professionals," the memo said, noting also that Galliard's compliance, risk and technology teams would begin reporting directly to Wells Fargo starting next year.
"Although there had always been a dotted line reporting to Wells, Galliard was the only remaining subsidiary that did not have these groups fully reporting up through Wells (Fargo)," the memo said.
Galliard, a major player in the stable value market, has 85% of its $92 billion in total assets in stable value accounts, according to the firm's website.