Seattle money manager Sirach Capital, whose $8 billion in assets once ranked it among the Northwest's biggest mutual-fund companies, has...
Seattle money manager Sirach Capital, whose $8 billion in assets once ranked it among the Northwest’s biggest mutual-fund companies, has quietly closed its doors.
The latest local victim of the shifting mutual-fund industry, Sirach shut down Dec. 31 and laid off its 15 remaining employees after its assets dwindled to $512 million last year as fund performance declined and clients withdrew money. A skeleton staff will wind up Sirach’s affairs by Jan. 28.
The closure of the 23-year-old firm, which follows the sale of Safeco’s mutual-fund business last year, highlights potent forces still rippling through the local investment business.
Sirach, which served institutional clients, closed despite having a well-funded parent, Old Mutual, a South African money-management firm headquartered in London that has more than $230 billion under management.
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“The bottom line is there was a loss of assets that we couldn’t quite stop,” Sirach chief executive Harvey Bateman said in an interview. “It got to the point where the firm wasn’t making money and we came to an agreement … that the best course of action was to shut the firm down.”
Sirach reached its peak with about $8 billion under management and 50 employees in 2000, Bateman said.
The closure marks a further narrowing of the local industry. “It’s sad to see the shrinking of the investment management opportunities and firms in the Seattle area,” said George Kauffman, who founded Sirach but left in 1998 to start a new firm, Rigel Capital. “It should be growing.”
Asked about Sirach’s demise, Old Mutual yesterday said the Seattle unit’s assets “had been in decline for a number of years following an extended period of adverse market conditions for its growth-oriented investment style.” It was Old Mutual’s first public statement on Sirach since the closure.
But others said Old Mutual’s ownership also was partly responsible for the $7.5 billion drop in Sirach’s assets in just four years. Sirach had grown over 23 years by mergers and successful investing, but had also gone through two ownership changes that employees said deterred clients.
Founded in 1981 as Sirach Partners by Kauffman, Boyd Sharp and Mike Kunath, the company merged in 1985 with Flinn Elvins Donahoe & Nelson to become Sirach/Flinn Elvins Capital Management.
In 1989 it was purchased by United Asset Management of Boston, which later merged it with Olympic Capital Management, a fixed-income investment manager. In turn, Old Mutual bought United Asset in 2000.
“Sirach’s strength was in the equity side and for four to five years, the [combined] firm did very well,” said Batemen, who joined Sirach in 1988.
But the collapse in equity markets following the end of the stock boom, along with declines in fixed-income investments after the Sept. 11, 2001, attacks, took a toll on performance.
“We weren’t positioned well when 9/11 happened,” Craig Hintze, who retired from Sirach last year. He cited Sirach’s holdings of airlines’ commercial debt as an example. “It just started a poor period.”
Poor performance curbed Sirach’s ability to attract new clients. But while firms can usually survive a few bad years, the ownership change began to raise questions about its stability, a concern only heightened by subsequent staff departures.
“Clients have to believe in what you’re doing, and believe you’re going to stay there,” Hintze said. “There were problems explaining to clients who owned us.”
Old Mutual’s decision to buy United Asset saddled it with a number of disparate firms managed by independent people who were well into their careers, he said. The company didn’t give employees an ownership stake, and that made it difficult for Old Mutual to attract and retain new talent, he said.
Bateman said the company’s focus on growth companies left it in a weak position during the last several years, when value-oriented investors were more successful.
“It’s also fair to say that the performance on the equity side was mediocre,” he said. That, along with the ownership questions and the fixed-income performance, “sort of got a ball rolling that we just couldn’t stop.”
Safeco’s mutual-fund arm, which managed about $3.6 billion and had 50 employees, was sold last summer to Pioneer Investment Management, a Boston firm that merged the funds into its own. Symetra Financial subsequently laid off some of the former Safeco workers.
“There’s been a trend recently of organizations either leaving Seattle or not doing business in Seattle, and that’s not a particularly good trend,” said Hintze.
Others said this could be the bottom, and noted other small money managers and hedge funds are setting up here.
“The Northwest is incredibly entrepreneurial with its people and its vision,” Kauffman said. “And that can apply to the investment management opportunities if you deliver a good investment product.”
Still, thinking back to the first $100,000 personal account that started the firm, he was disappointed at its end.
“You can imagine the blood, sweat and tears that went into growing something,” he said. “It was a personal sad chapter for me to see it close.”
Alwyn Scott: 206-464-3329 or email@example.com