William M. Ennis, the president and CEO of Evergreen Investments, has flown the firm's Charlotte, N.C., coop and headed north to lead the investment management sales, distribution and operations charge at the investment management unit of Morgan Stanley of New York. Evergreen is the $235 billion investment management arm of Wachovia Corp.
Ennis, who has been with Evergreen since 1994 and served his last day on Friday, is now president of global services at Morgan Stanley Investment Management, reporting to Mitchell Merin. Merin has served as the division's president and chief operating officer since 1998.
In his new role, Ennis, who industry insiders cite for his energetic style, intensity of purpose and leadership, will direct Morgan Stanley's global institutional and intermediary business, worldwide operations and non-proprietary business through Van Kampen Investments of Chicago.
Morgan Stanley's investment management unit, with a collective $421 billion in assets, encompasses the firm's global retail mutual fund and predominantly separately managed account institutional investment management businesses, as well as private equities, which include alternative investments. Distribution channels for Morgan Stanley-branded products include captive Morgan Stanley financial advisers and investment representatives, third-party broker/dealers, financial planners and banks. However, Morgan also sells its retail Van Kampen branded products through a network of 250,000 unaffiliated broker/dealers, banks, thrifts and insurance companies.
Ennis will take on the unit's sales and distribution role previously served by Dick Powers, who left Morgan Stanley at the end of 2002. In this broader role, however, Ennis will also oversee all back-office operations including customer service, said a Morgan Stanley spokesman. Ron Robison, who will now report directly to Ennis, had led those operations' activities.
Evergreen has no plans to fill the position left void by Ennis, "due to the strength of the existing Evergreen team," said Chad Peterson, an Evergreen spokesman. "Certainly Bill made significant contributions to our firm, and we wish him well in his new role," he added.
While Evergreen's CIO Dennis Ferro is credited with successfully running the firms' investments and portfolio management business, Ennis ran the business side, which included the firm's sales, marketing and administration for both the firm's retail and institutional business.
Ennis is also credited with putting together a top-notch team of savvy executives as well as motivated employees at Evergreen. But that initiative could come back to haunt the firm should Ennis choose to poach those loyal associates, with whom he has built such strong bonds, industry insiders speculated.
Industry sources said Ennis is leaving Evergreen Investments at the very top of his game, having built the firm from a small mutual fund shop with a barely noticeable $3 billion under management in 1994, to a serious investment management player. In mutual fund assets alone, Evergreen has $115 billion in assets under management and now ranks among the 25 largest investment management businesses, due to its uncanny ability to attract new assets during the difficult market environment of the past few years.
According to Financial Research Corp. (FRC) of Boston, among all mutual fund firms that predominantly sell through
the captive distribution channel, Evergreen ranked as the No. 1 seller in 2002, taking in close to $5.2 billion. That far outpaced second place's Principal Financial Group, which saw $2.6 billion in net new money, and Citigroup's Smith Barney Funds, which had net flows of $1.3 billion.
Ennis capped off a banner 2002. The firm scooped up institutional money manager J.L. Kaplan of Boston, whose niche is the small- to mid-cap value areas of the equity market. The acquisition also brought Evergreen two mutual funds that Kaplan had been previously sub-advising for Undiscovered Managers in Dallas. Later in the year, it acquired another two mutual funds, an asset-allocation and a large-cap value fund, from Grantham, Mayo Van Otterloo & Co. of Boston. That firm will continue to subadvise the funds.
Seizing off last year's momentum, Evergreen in February launched what was at that time the largest ever closed-end high-yield bond fund, with an initial public offering intake of close to $900 million. It just closed the offering period on its second closed-end fixed-income fund last week. A few weeks ago, the firm embarked on a new national, multi-media advertising campaign.
Ennis' arrival at Morgan Stanley is seen as having come not a moment too soon, said industry insiders and analysts.
Morgan Stanley has spent the last 2-1/2 years combining its previously separate four asset management units into one product platform, said one industry observer. Those include Morgan Stanley Asset Management, Dean Witter Intercapital, Miller Anderson Sherrard, and Van Kampen. The firm has also worked diligently to repair performance and get into all of the right distribution channels. "Now the firm has to execute," said the observer.
Two-and-a-half years is a long time for such disruptions, said James F. Mitchell, managing director and equity analyst at Putnam Lovell NBS Securities in New York. "It's time for someone to take a fresher look at it," he said.
Overall, the firm's investment management unit has seen long-term assets erode, according to FRC. Assets across the firm's fund groups now total $102.1 billion, down 34% from $154.7 billion at the end of 1999.
Still, with revenues from its investment banking and credit card units down, the firm's investment management unit now accounts for a larger slice of the revenue pie. In 1999, revenues from asset management, distribution and administration accounted for 16% of net revenues. In 2002, that figure jumped to 21%.
The firm as a whole has had challenges, including poor performance within its institutional investment management unit, and poor employee morale in the aftermath of a 2,200 person workforce reduction last November, Mitchell added. While the firm's investment banking and research units have faced regulatory ire regarding conflicts of interest among analysts and IPO allocations, its investment management unit isn't blemish free.
Van Kampen is still embroiled in a lawsuit filed in September 2001, which elevated to class-action status last year. The suit charges that the Van Kampen Prime Rate Trust improperly valued portfolio securities, causing the fund's net asset value to be misstated.
In late February of this year, Morgan Stanley was named in a lawsuit that charged its brokers inappropriately pushed expense laden B-shares for purchase by investors in its proprietary funds (see MFMN 3/10/03). The SEC subsequently began an investigation into B-share sales practices.
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