Before Dennis Ferro retires as chief executive officer at Evergreen Investments, Wachovia Corp.'s investment management arm, he says that he wants to expand its alternative investment capabilities and its international distribution.
"We want to continue to position ourselves and ramp up from a business development standpoint," he said in an interview Wednesday after the company announced his plan to retire at yearend and named his successor. "That means increasing product development on the alternative investment side and developing distribution internationally."
Ferro said Evergreen wants to develop portable alpha and 130/30 products while it looks to increase sales in Europe and Asia.
The unit hopes to achieve these initiatives organically, he said, but would continue to consider making acquisitions strategically.
Evergreen announced Ferro would be succeeded by its president of global distribution, Peter Cieszko. Ferro, 63, has been CEO since 2002. He said that he had been in talks with David Carroll, a Wachovia senior executive vice president and head of its capital management group to whom Ferro reports, for the past 18 months about retiring.
He said he had waited until he found a new chief investment officer before making the retirement announcement. (Evergreen also announced Wednesday that it had hired David Germany, a veteran of Morgan Stanley Investment Management, to be its chief investment officer.)
Ferro, who has worked in investment management for 39 years, said he plans to stay on until yearend to help Cieszko, who has worked at Evergreen since July 2006, and Germany make the transition smoothly. His decision to retire has nothing to do with market conditions that have hampered Evergreen funds' mortgage- and asset-backed investments, Ferro said.
In June, Evergreen announced it liquidated its ultra-short opportunities fund, a portfolio that was invested in asset- and mortgage-backed securities whose net asset value fell sharply this year.
Ferro said he wishes that he was not leaving in the midst of a bear market but that economic conditions are out of his control. "The entire industry is facing these credit market issues," he said. "We are going to continue to work on a lot of different things so that things will be in a good position for Peter at the end of the year."
Analysts said that Ferro will have left his mark on Evergreen in helping develop its multi-boutique strategy. Through this strategy, the company bought small asset management companies, kept their brands, and created a centralized risk management and distribution platform. "It is a strategy that everyone is imitating these days," said Burton Greenwald, an analyst at BJ Greenwald Associates in Philadelphia. "This multi-boutique strategy has enabled bank-owned asset managers to thrive even after everyone moved to an open architecture platform."
Evergreen, which is based in Charlotte, bought Metropolitan West Capital Management LLC in 2006, a minority stake in Golden Capital Management LLC in 2005, and Boston's J.L. Kaplan Associates LLC in 2002. Last year, to expand internationally, it bought European Credit Management Co. LLC, a London fixed-income firm that had $26 billion of assets under management.
European Credit Management, established in 1999, has operations in Japan, Germany and elsewhere in northern Europe, Spain, Portugal, Asia, and Australia. It has distribution through banks and insurance companies, and 20% of its assets under management are in U.K. pension funds.
"ECM has distribution in nine countries and clients in 40 countries," Ferro said. Combine that with our interest in expanding our footprint internationally, and it is clear that global growth will be an important area in the coming years for Evergreen."
He said that Evergreen hopes to expand distribution in Europe and Asia. It has an international fixed-income team in London, Evergreen International Advisors. Wachovia started a marketing division in London in 2006 named Wachovia Global Asset Management.
Ferro said Evergreen may hire salespeople in Europe to increase distribution. "We are happy with the distribution we have seen with large pension funds in Europe," he said, "but there are other distribution arrangements we want to explore."
In Asia, Evergreen wants partnerships with financial services companies in Japan, China, Hong Kong, Singapore, and Australia. He said it is in talks with "various partners" in the Far East and he hopes to announce a partnership this year.
Evergreen's assets under management grew 4.5%, to $258 billion, during Ferro's tenure as CEO since 2003.
But it lost $60 billion in assets under management that were moved from Evergreen as a result of divestitures or transfers through Wachovia, including $12 billion that was transferred to U.S. Bancorp when Wachovia sold its corporate and institutional trust business two years ago, a spokeswoman said.
Evergreen wants to expand U.S. distribution, Ferro said, and has expanded and reorganized its sales teams domestically in both the retail and institutional channels. But further growth will require work both within and beyond Wachovia's existing distribution channels.
"When we look at Wachovia Securities, we view it as an opportunity," he said. "When you look at the company's heritage, it is really similar to Evergreen in that it is made up of a lot of smaller securities firms."
"But we have never been the house brand for any Wachovia firm, and that is a good thing," he said. "We have to prove ourselves to Wachovia just like we have to prove ourselves beyond Wachovia in order to expand distribution. Our relationship with Wachovia Securities is arm's length, but it is a great opportunity." Ferro said he knows his legacy at Evergreen will be the multi-boutique strategy. He said he worked hard to develop a platform "that did not have a lot of redundancies."
"We knew that to succeed we needed a better organizational approach to risk management and a more cohesive approach to incentives and compensation," he said. "We knew that if we had the structure in place, we had the right investment teams in place to increase distribution."
Analysts said that Evergreen's growth in the past five years has been relatively lackluster compared to some of its peers, but Ferro disagreed. He said that despite difficult market conditions Wachovia has remains committed to its wealth management business while some banks have sold their wealth units.
"That commitment hasn't changed, in good times and in challenging times," he said. "We have worked through it all, and the fact that we are continuing to acquire validates Wachovia's commitment to us. Hopefully, we will continue growing and remain an important part of the parent company."
