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Thursday 11th of October 2007
October 5, 2007

Bear Stearns To Lose As O’Shaughnessy Starts Up Rival

by Stewart Douglas

Story link: Bear Stearns To Lose As O’Shaughnessy Starts Up Rival

Asset management firm Bear Stearns looks set to lose out on around 18% of its current asset portfolio as a result of an outgoing senior executive looking to form his own asset management firm, despite an arrangement that has been made to share initial revenues from the outgoing asset-base.

The departure of systematic equity head James O’Shaughnessy will see Bear Stearns lose asset-contracts to the value of $8 billion to his new startup asset management firm, although there is thought to be some form of fee-sharing arrangement in place between the new company and Bear Stearns.

The move came as a deal struck between the departing executive and existing Bear Stearns management as a damage limitation exercise, finding a common ground that was acceptable to both parties. O’Shaughnessy’s new startup will reap the benefit of a significant asset management portfolio on incorporation, while Bear Stearns will maintain some share of the management fees arising from those assets.

O’Shaughnessy announced his intention to leave Bear Stearns for his own enterprise in July of this year, in a move which sparked panic amongst Bear Stearn management. However the negotiation over the management of existing customers set to leave with O’Shaughnessy came to an amicable conclusion with the proposed revenue-sharing model.

Bear Stearns was also wrapped up in scandal and embarrassment after suffering substantial losses through over-leveraged hedge fund investments. As a result of over-eager investment decisions the funds collaposed, leaving a substantial hole in the pockets of the Bear Stearns portfolio.

Meanwhile Bear Stearns has announced that it is in the process of moving towards acquiring two UK based financial firms in the near future which should extend its management investment portfolio further within financial sectors as it loses some of its more risky asset management services to O’Shaughnessy and his new equity firm.


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