Is it the end of Ivy as we know it?

Tue Apr 6, 2010

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The body has not been pronounced dead yet, but a team of investigators is already looking for clues for why this once robust $15 billion fund of funds firm now appears to be on life support.

By Niki Natarajan

The body has not been pronounced dead yet, but a team of investigators is already looking for clues to find out why the once robust $15 billion fund of funds firm, founded by Larry Simon and Howard Wohl in 1984, now appears to be on life support. How did this shining star fall so far?

As InvestHedge went to press, Ivy Asset Management was still in the intensive care unit, but, from the outside, the now $4.99 billion firm looked perilously close to the graveyard. Indeed, sources say some staff have started to send CVs flying around the industry and there are rumours about SkyBridge planning to act as organ recipient to parts of the business.

Amid reconstructing the business, parent BNY Mellon confirmed that this is part of an ongoing reorganisation that is going to see the alignment of its three fund of funds businesses under Phil Maisano, head of alternative investments. As with any implant, however, only time will tell if the body accepts or rejects the new organ.

So far, Mellon Global Alternative Investment has been absorbed by EACM, but further evidence to corroborate rumours of the closure of Ivy's commingled fund and Mellon taking over the managed accounts assets could not yet be found.

Mighty Mellon, like an eccentric collector, has been hoarding boutique asset management companies for decades and usually leaves them well alone. In fact, in the asset management M&A world, being bought by Mellon typically guarantees a 'hands-off' parenting approach. So what happened? Why has Mellon decided to discipline the child now?

Many believe that Ivy's baby was thrown out with the bath water when founders Larry Simon and Wohl handed over the reins in 2000. A succession plan with Sean Simon, son of Larry, at the helm seemed to make sense. But what now looks like a poor investment diet took its toll and it seems that BNY Mellon's intervention is simply the only way the doctors can help Ivy recover from a double Amaranth Advisors and Madoff heart attack.

In Tim Galway's Inner Game of Tennis, Performance = Potential - Interference. But when, if ever, did 'interference' creep into Ivy? Indeed, is an M&A deal an automatic death knell to performance?

In this issue alone, we report that Weston Capital Management has announced its sale to and Standard Life has bought Aida Capital. Are these firms doomed? And if they decide to head down that route, are there clues as to what makes a good parent?

One thing that many of the winners at the recent InvestHedge Awards have in common, including Aurora and Archstone, is that they are independently run (or at least have hands-off parents).

Another winning denominator seems to be that they have not lost their passion for investing, usually because the founding investment team stays intact. The Orbita funds (which have moved from Coutts to RBS and now to Aberdeen) are a perfect example, with Michael Timmerman and Robert Dawkins still at the helm.

A sale to a distributor with no conflicting product also seems to work, as Permal has shown with its relationship to Legg Mason. Looking back in history, it seems like any adoption deal where there are two similar businesses vying for attention have resulted in either death or separation -as IAM and Cadogan seem to have shown by opting to go solo again.

Meanwhile, many eyes are on the future of Man Investments, which has merged Glenwood and RMF - two of its units but with very different philosophies - following a combined fall in assets from $54 billion at 30 June 2008 to $17.1 billion at the end of 2009. Many are asking: will its rebrand - in part to shed the Madoff tarnish - succeed? Likewise, many will be watching to see what Mellon makes of a three-sided merger including the remaining bits of Ivy.

ISSN: 2151-1845 / CDC10004H

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