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Rating:Is W&R Getting Ready to Trim the Ivy? Not Rated 1.0 Email Routing List Email & Route  Print Print
Tuesday, July 29, 2014

Is W&R Getting Ready to Trim the Ivy?

Reported by Tommy Fernandez

Spring is the time gardeners sharpen their shears, and fundsters are wondering whether that is happening in Kansas City. In recent weeks there has been increasing buzz that change is coming to Waddell & Reed's Ivy Funds.

(WDR released its second quarter 2014 earnings this morning, and the top brass talked with analysts about the results.)

Sources tell MFWire that speculation is growing, both inside and outside the company, that major strategic changes are looming. This follows on a tip given to MFWire last year that the Kansas City-based Waddell was close to a deal to sell itself to Ameriprise.

A deal with Ameriprise obviously never happened, and there is no talk in the market that one is in the works. Waddell & Reed execs are also not discussing the possibility. Responding to a query from MFWire on whether all or part of Waddell is up for sale, a company spokesperson prepared this statement:

As with any public company, rumors regarding a sale may arise from time to time. As a matter of corporate policy, we do not comment on rumors.  Our status as an independent organization has, since 1998, served our public company shareholders, mutual fund shareholders and employees very well.

Ameriprise also declined comment on any deal.

Speculation about W&R's future follows the departure of three PMs from Ivy in the past nine months, after literally a decade of a perfect retention record at the Kansas City company. The departures include High Income Fund PM Bryan Kurg, who left in November 2013 to join Artisan Partners, followed by former Ivy Asset Strategy co-PM Ryan Caldwell in June. And former Ivy High Income Fund PM William Nelson was was fired in June.

Meanwhile, a senior business executive at a rival fund shop says he has been approached by Ivy staffers, including PMs, expressing concern over potential corporate changes, as well as compensation.

Waddell top brass claim to have low PM-turnover. A Waddell spokesperson prepared this statement to MFWire on the subject:

Prior to the departures of three portfolio managers beginning November 2013—only one of which resulted from a manager leaving to join another asset management organization—we'd had no other portfolio manager departures in the prior 10 years, other than through retirement.  Clearly, our investment culture and process more often than not inspire loyalty and longevity.  Our average portfolio manager tenure at Waddell & Reed / Ivy Funds is 17 years.

Moreover, the Waddell spokesperson also provided this statement on the subject of PM compensation at the firm:
We have a highly competitive compensation structure. This is not just our opinion -- it is quantifiable through our ongoing analysis of widely utilized compensation data sources.

Another subject of speculation has been that of succession planning for Waddell CEO Henry Herrmann, who is in his early seventies and has been with the company for 42 years.

Regarding succession, the Waddell spokesperson had this comment:

We have, for many years, addressed succession planning with our board of directors; the board specifically engages succession planning on an annual basis.

Waddell's relationship with Ivy is an increasingly uncommon one for a broker-dealer. Along with Wells Fargo, Raymond James and former purported-suitor Ameriprise, W&R is one of a few major brokerage houses to operate a captive fund firm. Indeed, the tight ties between W&R and Ivy could make an acquisition of the firm knottier than usual in these days of open super-market shelves and specialty distributors.

Yet spinning off Ivy could prove difficult, too. Waddell also offers its own Waddell & Reed Advisor Funds, so breaking off Ivy alone could be disruptive on the PM side for both Ivy and the W&R Funds. And adding the W&R Funds to the spinoff could be tricky, too, as they're primarily distributed through Waddell's own broker force. 

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