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TheStreet Open House

Pzena Investment Management CEO Discusses Q3 2010 Results – Earnings Call Transcript

I will touch on our investment outlook a bit more in a minute, but first I want to update you on our business. I am very happy to report that as of today the trailing three-year returns for many of our investment strategies are now in positive territory relative to their respective benchmarks and the others are rapidly approaching parity. We are hopeful that as the significant underperformance we experienced in the fourth quarter of 2007 rolls off by year end, these records will look even better.

The business implications of this improvement are clear. Managers trailing three-year relative returns are weighed heavily by consultants in their manager selection process along with the managers’ long-term track record. Although, our long-term track record has been excellent, our US value and small cap value products have nearly 15 years of history and have generated 270 and 450 basis points of extra return for annum since inception.

We have been living with the challenged three-year record due to the underperformance we experienced during the financial crisis in the last half of 2007 and the first half of 2008. We are already beginning to see signs that the passage of time has begun to heal some of the wounds in that underperformance. Search activity which bottomed in the middle of 2009 and had shown signs of improvement early this year until the mid year market collection cooled things off had begun to tick back up again.

Our trailing 12-month new search activity is at the highest level since 2008, albeit, significantly below the peak level of prior years. We attribute the improvement to one, our improving performance; two, a flicker of institutional interest in equities and three, relatively strong demand for global and emerging market strategies. Searches entered into over the last six to 12 months are now bearing fruit. Gross institutional inflows during the quarter were $628 million up from the prior two quarters.

Read the rest of this transcript for free on seekingalpha.com

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