09/28/2011

Partner Quits QFS Amid Management Shift

A senior executive at QFS Asset Management left the quantitative fund shop just months after founder Sandy Grossman orchestrated a merger and turned over the chief executive’s job to an outsider.

Theresa Patti, a partner and senior portfolio strategist, stepped down in August after more than 10 years at the Greenwich, Conn., firm. She hasn’t disclosed her next move.

Patti’s position encompassed a range of responsibilities at the $2.2 billion firm. She worked closely with Grossman on analyzing the risks and returns of QFS’ trading strategies, advised clients on setting up separate accounts and helped develop investment products. She also served as a liaison between the trading desk and investment community.

“She was basically the voice of the firm,” said a source familiar with the operation. “She went into large investor meetings, did more than most marketers, knew trades. She was like a PM.”

Another QFS executive, research chief Jim Xiong, left the firm in June. He had spent 14 years working under Grossman and has yet to land a new position.

It’s not clear what prompted the departures, but sources said they likely were related to Grossman’s diminishing role at the firm. After QFS acquired New York asset manager Cenario Capital in April, Grossman stepped down as chief executive and installed Cenario’s chairman and chief executive, Karlheinz Muhr. Grossman is chairman of the combined business.

One source said Patti will take a 6-12 month “sabbatical,” then plans to seek a senior position at another firm. Before joining QFS in April 2001, she worked in marketing and investor relations at Rivel Research of Westport, Conn.

Grossman founded what was then known as Quantitative Financial Solutions in 1988. Over the years, he has gained recognition for his quantitative approach to global-macro investing. His two main funds, QFS Currency and QFS Global Macro, have put up impressive numbers since the financial crisis. The currency vehicle, with $859 million of assets, was flat in 2008, then gained 7.9% in 2009, 36.8% in 2010, and this year was up 9.7% through Aug. 31. The global-macro fund, with $363 million under management, gained 21.7% in 2008 — versus a 19% loss for the average hedge fund. It was up 0.9% in 2009, 15.6% in 2010 and 2.7% year to date through Aug. 31.

Despite mostly strong returns, QFS saw its overall assets under management slide from $3.6 billion just before the financial crisis to $1.5 billion at the start of this year. The acquisition of Cenario boosted QFS’ assets to their present level.

Grossman’s decision to step down as chief executive at age 58 has led to speculation that he soon plans to retire. “He’s tired and he’s done,” one source said. “He wanted an exit strategy.”

But another source said the acquisition of Cenario was part of a plan by Grossman to “institutionalize the business.” The idea was to free up Grossman so he could focus more on research, while turning over operational duties to Muhr, a long-time friend of Grossman’s. But the reorganization also represents the first step of a succession plan that ultimately would have Muhr replacing Grossman as chairman.

Before Cenario, Muhr was a managing director at Credit Suisse, where he sat on the management council and helped run Credit Suisse Volaris, a volatility-management business.

To fill Xiong’s position, QFS recruited Jim Conklin, previously head of research at currency investor FX Concepts. Conklin earlier worked at Fortress Investment and Lehman Brothers.

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