NEW YORK (Reuters) – Top executives at asset manager and investment bank Guggenheim Partners LLC are working to quell clients’ concerns about the fate of their chief executive officer and about an ongoing examination by U.S. securities regulators.
A top investment consultancy and at least four of Guggenheim’s institutional clients have said they are closely monitoring developments, with one saying the work environment at the Chicago and New York-based company “has indeed deteriorated.”
Some investors, including the Sonoma County Employees’ Retirement Association in California, and the South Carolina Retirement System Investment Commission, formally put Guggenheim on “watch” lists, keeping a closer eye on performance than usual, documents seen by Reuters show. The moves could lead to those firms cutting ties with Guggenheim, which oversees $ 295 billion in assets.
Guggenheim “relationship managers,” a top lawyer and even its global chief investment officer, Scott Minerd, are working to address clients’ concerns after months of bad press, according to documents seen by Reuters and interviews with clients and executives.
“I‘m sure they’re saying the same thing to everybody,” said Steven Turi, chief investment officer for SkyView Investment Advisors LLC, a longtime Guggenheim client. “They’ve been trying to deal with it.”
Closer scrutiny by pension plans, investment consultants and other investment firms shows Guggenheim may have more work to do to assuage investors concerned about the status of chief executive Mark Walter.
“I don’t want to see any client of ours unhappy,” Minerd said in response to one pension fund client’s concerns, which Reuters raised in an interview this week. “I will meet with them.”
Gerard Carney, managing director and spokesman at Guggenheim Investments, later added that Minerd, Guggenheim Investments President Jerry Miller, and assistant chief investment officer for fixed income Anne Walsh “as well as our client service teams have been very proactive in engaging and communicating with clients to ensure that they understand our positioning, clear up any mischaracterizations and ensure we listen to and address any concerns.”
He said public pension assets are about 1.4 percent of Guggenheim’s overall assets under management.
A source told Reuters in September that at least one member of Guggenheim’s board of directors pressed Guggenheim CEO Mark Walter, an owner and the chairman of the Los Angeles Dodgers baseball team, to resign after he became the subject of news coverage. A spokesman rebutted that source, saying Walter was not being pushed out of the investment firm he helped found.
That report followed a Financial Times story in July that said there was a “power struggle” between Minerd and Walter. Both men denied that report.
When asked on Tuesday about Walter’s future, Minerd said: “I think Mark will be involved with the firm. Will he be CEO? Probably not forever. Mark has other business interests.”
News stories have questioned Walter’s relationship with an employee, Alexandra Court, and her elevation to a role overseeing institutional distribution.
Court is in the process of negotiating a possible exit from the company, according to a person familiar with the matter. She did not respond to a request for comment.
Walter is not listed among executives, including Executive Chairman Alan Schwartz, Minerd and others attending the firm’s 2018 investment outlook summit at New York’s Solomon R. Guggenheim Museum. The event, originally planned for Monday, was rescheduled to March.
Guggenheim also faces scrutiny from the U.S. Securities and Exchange Commission about an investment it made in a London-listed company focused on banking operations in Africa, named Atlas Mara Ltd, according to a person familiar with the matter.
Guggenheim previously declined to comment on that examination, but denied wrongdoing on that transaction and others that raised concerns in a letter to one client seen by Reuters. Atlas Mara, which was not accused of wrongdoing, did not comment.
“Although Guggenheim has dismissed many of the speculations from our conversations we think the situation at the firm is not great and the work environment there has indeed deteriorated in the recent months,” investment consultant NEPC LLC said in a September commentary published online by one of its clients. NEPC declined to comment.
“I am a harsh judge, especially of myself, and I always say, we could’ve done so much better,” said Minerd. “But we really did try to stay in contact with our institutional clients and our retail distributors, so that they were kept as current as they could be.”
The media attention has not deterred retail investors from investing with Guggenheim. The company posted a 55 percent organic growth rate in overall mutual fund assets under management this year, through October 31, according to research firm Morningstar Inc.
Their flagship Guggenheim Total Return Bond Fund recorded 6.17 percent returns this year, through December 12, beating 97 percent of peers, Morningstar said.
South Carolina Retirement System Investment Commission Chief Executive Officer Michael Hitchcock said Guggenheim’s investors continue ”to perform well … despite distractions at the executive level.
“However, we have them on our internal watch list and continue to monitor them closely.”
Reporting By Trevor Hunnicutt and Jennifer Ablan; editing by Clive McKeef