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Rating:Security Global Scores a Sub-Advisory Win
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Tuesday, December 15, 2009

Security Global Scores a Sub-Advisory Win

News summary by MFWire's editors

American Independence has hired Security Global Investors to sub-advise its international equity fund, which has just under $100 million of assets.

The American Independence International Equity Fund (IIESX) was launched in 2000 and is the company's 11th fund. It is the fifth American Independence fund to be sub-advised.

IIESX, which will will be managed by San Francisco-based SGI principals Dave Whittall and Scott Klimo, is designed to provide long-term capital appreciation and employs a fundamental investment strategy.

New York City-based American Independence considered several other sub-advisors before deciding on SGI, which it deemed the best fit due to its management team's deep understanding of various international markets which extends beyond mere quantitative, data-driven approaches.

“We looked at several other firms to be sub-advisor for this kind of fund, which is EAFE-based, but the other sub-advisors would not have offered us the ability to customize or allow us to take the active management approach that we like,” explained John Pileggi, managing partner at American Independence, in an interview with The MFWire. “We would have just been an add-on for the other sub-advisors because they run their systems quantitatively. SGI wasn't running any EAFE-based funds, although they manage global money, so we knew that we would receive the distinction of becoming their sole EAFE mandate today and that we'd receive a lot of attention.”

American Independence obtained the international equity fund as part of a group of funds it acquired in March 2006. Under its prior management, the fund was sub-advised by American Beacon for its first six or seven years. After the fund came under American's management and Beacon elected to dissolve its hub-and-spoke structure, which alloted multiple managers to run each fund, Texas-based Barrow Hanley became the new sub-advisor.

In 2008, American Independence put in motion plans to move management of the fund in-house, bringing on board a team of quantitative managers who were experienced in this type of specific mandate. American Independence had second thoughts however as the firm began to move away from a quantitative-management approach and focus more on adding alpha. At that time, SGI stepped into the picture.

"Rich Goldman [president and CEO of Rydex/SGI Investors] is an old friend of mine and told me that SGI had recently acquired a sub-advisor in California that he thought would be a perfect fit for us. He was right," Pileggi recalled.

"If 2008 showed us anything, it's to pursue the opportunity to add alpha if you're on the ground and actually know companies in an area. The managers at [SGI's] group have been together for a long time, they've lived in the far east and in Europe. When you talk to them about international markets they speak very eloquently about different techniques, the companies on the ground there, the killer applications some of the firms have. Our company doesn't just believe in riding the wave of data, we believe in active management, so better to work in partnership with SGI and set ourselves up for long-term success," added Pileggi.

Pileggi also described American Independence as having been in an 'acquisitive' mode for some time. Since 2006, the firm made three acquisitions, including the Fusion Global Long-Short Fund that it aims to have officially up and running under the American Independence banner by the end of December. This has not quenched AI's appetite, however, and Pileggi indicated that the company is always on the hunt for attractive buying opportunities.

"In our view, there are a lot of mid-sized money managers who have struggled and simply have not garnered the scale to be competitive. Part of our thesis is that we can be an aggregator of these small groups, which we demonstrated three times already since 2006, and that we can bring shareholders in sub-scale funds or funds that are under-performing into our aegis and add greater value. We think we can do well with this model and be successful in the long run," he said.

While there is "nothing on the table yet," according to Pileggi, he noted that American Independence was very impressed after a recent visit to SGI's Irvington, New York-based group, indicating they will "definitely consider SGI to sub-advise" should American Independence add a growth stock mandate fund to its roster. 

Edited by: Patricia Kelly

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