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Rating:New PMs Take Over a 62-Year-Old Fund Not Rated 4.0 Email Routing List Email & Route  Print Print
Wednesday, February 17, 2016

New PMs Take Over a 62-Year-Old Fund

Reported by Neil Anderson, Managing Editor

One of the oldest mutual funds in the country is under new portfolio management, even as the fund shop behind it is amping up its distribution efforts.

Sean Kelleher
Shay Assets Management, Inc.
President, Chief Investment Strategist
On January 1, Robert Jones and Ana Galliano of Summit, New Jersey-based System Two Advisors took over as PMs of the three-star, $40.3-million AMF Large Cap Equity Fund. And Sean Kelleher, president and chief investment strategist for fixed income at Miami-based Shay Assets Management, Inc. [profile] (the advisor to the fund), says that the Shay folks are building out their distribution capabilities. The fund's chief distribution in the past has been through savings banks in the state of New York.

"We're trying to expand into more of the traditional distribution channels," Kelleher tells MFWire. "We are starting to interview wholesalers and third-party wholesale teams.

The AMF Large Cap Equity Fund dates back almost 63 years, to June 30, 1953. For more than 20 years the fund had been PMed by John McCabe and Mark Trautman, first at Nationar (the fund's previous advisor) and then at Shay. Now, Kelleher confirms, McCabe and Trautman are retiring.

Enter Galliano and Jones of System Two, who are also now employees of Shay. Jones previously decades at Goldman Sachs Asset Management, where he built out its quantitative equity investing, before departing in 2010. He founded System Two in 2012.

With the retirement of McCabe and Trautman, Kelleher says, the Shay folks saw an opportunity to shake things up at the fund. They chose the quantitative stylings of Jones and Galliano, who pull together four outside investing multiple models, add in their own, supplement it with a team of fundamental analysts for the non-quantitative part of the equation.

"We really needed to bring our investment process into the 21st century," Kelleher says. "When you look across all the social science, consistently, all the research shows that ... multiple decision models tend to lead to better results than a single model."

"I have come to believe that the wisdom of crowds is superior to the hubris of experts," Jones states.

"We were very fortunate to have found System Two at the time we did," Kelleher says. "They're really just coming out of their incubation period."

Kelleher adds that using a quantitative process gives a small fund shop the scale to "really look at the entire eligible universe of investments."

Shay is primarily backed by Roger Shay Sr., former head of fixed income at Merrill Lynch. Kelleher and others at Shay also all worked together back at Merill in the 1980s. The asset management shop has about $500 million in assets under management or advisement. Combined with its affiliated, similarly-named broker-dealer (which focuses on distribution with banks and credit unions), Shay has about 30 employees. They offer a pair of fixed income funds, and Kelleher hints that more are on the way. 

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