North Carolina Supplemental Retirement Board of Trustees, Raleigh, voted Thursday to place Galliard Capital Management, a Wells Fargo Asset Management subsidiary that manages a $2 billion stable value fund for its 401(k) and 457 plans, on its watchlist, citing concerns about the stability of the firm after organizational changes.
North Carolina's investment staff and its investment consultant Callan recommended placing Galliard on watch after four senior executives at the firm announced their intentions to retire from the firm, including founding managing partner and president Karl Tourville, who is leaving in mid-2020, said a June 3 memo written by Loren de Mey, an assistant investment director for the plan.
Additionally, WFAM executive vice president and President of Wells Fargo Funds Management Andrew Owen, who currently serves as chairman of Galliard's board of directors, will replace Mr. Tourville as president of Galliard on Jan. 1. On that date, Galliard's operational risk management, compliance and technology teams will also "get a direct reporting line into centralized Wells Fargo's risk management and technology groups," the memo said.
"Galliard was the only remaining subsidiary that did not have these groups fully reporting up through Wells," it said.
Overall, the watchlist status for Galliard was recommended "given the lack of clarity with Galliard's ability to retain and incentivize their investment team and the changes with Wells Fargo taking a more active role in the management of the firm," the memo said.
Other executives retiring from the firm include, founding managing partner Richard Merriam and Carrie Callahan, managing partner and head of client service, who both retire at the end this year. Additionally, Leela Scattum, partner and chief stable value strategist, will retire by the end of next year.
North Carolina investment staff received word on April 5 that the executives, including Galliard president Mr. Tourville, were retiring.
Of note, Wells Fargo has begun working on retention bonuses for key investment professionals at Galliard, as the current revenue-sharing agreement between Wells Fargo and Galliard will sunset at the end of this year, according to the board memo.
Galliard's mandate represents about 17% of the North Carolina Supplemental Retirement Plan's assets, as of April 30, investor documents show.
Regarding Galliard's succession planning, Michael Norman, partner and chief administrative officer, will assume the role of head of client service, and Nick Gage, principal, will become chief stable value strategist.
Galliard also listed the aforementioned retirements and succession plans in its most recent Form ADV filing, dated April 29, with the Securities and Exchange Commission.
Minneapolis-based Galliard had $92 billion in assets under management with more than 230 institutional clients, as of March 31, according to its website.
On Thursday, a Wells Fargo spokesman provided a statement on the changes at Galliard.
"We are extremely confident in the leadership and investment teams at Galliard. We look forward to working with all of our clients as we continue to implement our succession plan, which we began preparing early last year. The Galliard team brings extensive experience in the asset management industry, as well as a long track record of providing innovative investment solutions to our clients," the statement said.