The end of an era (and the start of a new one)

Last week, I was catching up and making my farewells to a number of my friends and former colleagues from Batterymarch. The announcement had come in May, as per this Bloomberg story:

Legg Mason Inc. (LM) is firing 62 Batterymarch Financial Management employees as it combines the affiliate with QS Investors, the global quantitative equity firm it’s purchasing this year.

The employees will depart beginning in July, and 12 will join QS Investors, spokeswoman Mary Athridge said in an e-mail. The Baltimore, Maryland-based money manager sent a letter to the state of Massachusetts providing notice under the Worker Adjustment and Retraining Notification Act, she said.

I had spent 10 years of my professional life at Batterymarch and I can say without reservation that it was an truly innovative and pioneering firm. This Pensions + Investments article summed up the history of the firm, co-founded by Dean LeBaron, best with this quote from Larry Speidell:

“Dean was always looking for the next idea. He was really obsessed with doing things differently,” Mr. Speidell said. “When index funds reached their general popularity, Dean abandoned them. When he felt that markets were more efficient, he developed an international strategy.”

Mr. LeBaron himself said: “I would prefer to be first than best.

“First was easier to select. We were always looking to fill that unfilled niche.”

“Batterymarch was a pioneering firm in the quant era,” said Michael J. Clowes, retired editor of P+I and now editor at large. “It's unfortunate that it'll be no more. It's a part of history.”

During the early 70's, when most equity investors were fundamental stock pickers, Batterymarch was a pioneer in indexing. In the late 70's, when the custodian banks moved into the investing business in a serious way, Batterymarch was an innovator into quantitative equity management, first in the US and later internationally. Back then, whoever dreamed of using quantitative techniques in strange places like *gasp* Japan??? In the mid-1980`s, Batterymarch was the first institutional investor in Latin America - and that effort branched out into other emerging markets.

I joined the Batterymarch organization in Toronto in 1990, as part of the effort to bring quantitative equity management to Canada. Later, I moved to Boston to be a PM as part of the international equity team, though I did work on both US and emerging market groups during my tenure. It was a heady time for a thirtysomething portfolio manager who was just learning the business. The experience was like stepping from the minors to the major league.

Batterymarch had a very flat organizational structure and therefore I was lucky to have had the opportunity to learn about many aspects of the investment business that many of my peers may not have been exposed to in a lifetime, from building quantitative stock selection models, to portfolio construction and optimization, to trading, to model and portfolio analysis and, last but not least, marketing and client service. The unfortunate fact for many young quants today is that they become overly specialized and become an expert in only one discipline, e.g. portfolio optimization, without knowing how the whole investment process worked together.

What`s more, I was surrounded by a group of innovative thinkers with different disciplines, fed by the academic thinking that came out of the Harvard-MIT axis in Boston. It was an exhilarating time of my life that I will never forget. It was there that I met the likes of Evan Schulman, trader extradinaire and serial entrepreneur, Larry Speidell, CIO at Frontier Market, Mary Ann Bartels, CIO of Portfolio Strategies at Merrill Lynch, Tom Linkas, Jarrod Wilcox, just to name a few. There have been many others and I apologize if I left out any names.

It is therefore with great sadness that many of my former colleagues and I marked the passing of Batterymarch Financial Management.


A New Era for me
I do have another announcement to make. Astute readers will also notice from changes on my blog that I am no longer a portfolio manager at Qwest Investment Fund Management. Qwest and I decided to part ways because we were going in different directions. I am working on a number of projects that I am not at liberty to discuss at this time yet.

However, I would like to tie up a few loose ends. First of all, I received some feedback to the termination of the weekly Qwest newsletter, Trend Indicator, where I discussed the model readings of my Trend Model (see An intriguing Trend Model interim report card). The real-time history of the Trend Model was promising, as changes in trend were correlated with changes in market direction. In addition, my blog post also highlighted the “demonstration account“ that I had been running (and will continue to run) based on the Trend Model and some short-term sentiment indicators was showing some promising results.

I will continue to update the Trend Model readings on a weekly basis through my vote on the TickerSense blogger sentiment poll.


Follow me on Twitter
While I was at Qwest, I was constrained from extensive use of social media because the Securities Commission required that every tweet and message be first reviewed by Compliance, which created a logistical nightmare for the firm. Now that I am free from those constraints, please follow me on Twitter at @HumbleStudent but clicking on the link on the right.

In that sense, this is the start of a new era for me.