Already in an acquisitive mood,
asset management division extended its shopping spree to the holiday weekend and grabbed
Deutsche Banc Alex. Brown's
quantitative management team.
Unlike the mall-raiding hordes hunting bargains in washing machines and tennis shoes, Merrill's Fourth of July shopping resulted in a far more substantive pickup.
In one broad move, said asset management boss Jeff Peek, Merrill has gained "leadership" in the esoteric and lucrative area of quantitative money management. Quants, as the area's pros are known, seek to extract investment wisdom from technical patterns and trends as opposed to pure fundamental analysis.
Wall Street has been expecting
personnel losses at Deutsche in the wake of the company's acquisition of
. The five-man group that joined Merrill, formerly
Bankers Trust Structured Investment Management
, had about $200 billion in assets under management, and is regarded among the leaders in the discipline.
Merrill's asset management division had been plagued with poor performance in some key areas, such as its main
Growth Fund falling more than 20% in 1998.
Peek had made several high-profile hires in the asset management unit during the past year in an attempt to revitalize
the division, as well as providing enough quality products to keep clients from taking their money, and the resulting fat management fees, elsewhere.
Quantitative vehicles were near the top of that agenda. "We have a chance to bring them in to manufacture product for our institutional and retail channel. It extends our whole platform," Peek says.
The kind of product the team will manufacture will range from sector index offerings to enhanced products, according to the unit's head Dean D'Onofrio, a Merrill managing director, and another Bankers Trust alum. Merrill already has $6 billion in assets in quant vechicles.
One type of product, for instance, could be buying a basket of stocks which report earnings surprises and selling a basket that had disappointed based on the belief that "good profit opportunity exists even after a surprise has come out," D'Onofrio says. "We try to identify characteristics we want to accentuate," he says.
Peek is expecting Merrill's retail client base -- in the United States and overseas -- to embrace the products. He also anticipates the new quant team's traditional clients to follow them to Merrill from the new Deutsche. Fidelity has a successful line of quantitative and index funds.
"There is clearly investor demand for these things," D'Onofrio says. "We already have $500 million under management (at Merrill) and we'd like to keep it here."
The team, to be called
Merrill Lynch Quantitative Advisors
, consists of Frank Salerno, Anthony Conroy, Phil Green, Sid Hoots and Rick Vella.
Their hires also amount to a measure of revenge for Merrill, which lost two prominent junk bond trading bosses -- Thomas Gahan and Richard Byrne -- to Deutsche in early June.