Reported By Yaël Bizouati June 7, 2011

The former Morgan Stanley Investment Management portfolio management teams, which briefly joined Invesco as part of a larger acquisition and then parted with the firm, are faring well a year later, despite the different routes the teams have taken.

In October 2009, MSIM sold much of its retail business to Invesco in a deal that closed last June. It created overlap with some existing Invesco products, and several teams – including some with a modest institutional buisiness – departed.

The migration gave way to the rebirth of Affinity Investment Advisors and the formation of Lockwell Investments. Echo Point Investment Management was acquired by Old Mutual Asset Management. And a former MSIM portfolio manager and analyst joined Cortina Asset Management.

Affinity Investment Advisors, a team led by Gregory Lai, chose to re-form itself last October. The large-cap equity firm first sprang up as an independent shop in 1992; it was acquired by MSIM in 2007.

A year after the transition and eight months after regaining its independence, Lai says that, while being part of MSIM was a great opportunity, independence has its benefits, too.

“There’s this assumption that larger firms bring a certain reduction in business risk to clients, but from a performance- and a client-centric perspective, a small boutique has a better ability to focus on clients’ needs,” Lai says. “And, in a large organization, you have to compete internally for resources, for shelf space, for everyone’s agenda.”

Lai’s Irvine, Calif.-based team includes senior portfolio managers Michael Petrino and Stephen Pelensky; portfolio manager Jordan Floriani; senior associate Emmy Chang; and COO Jeffrey Randolph. Steve Figliozzi, a longtime MSIM veteran, joined them in January to lead the distribution effort.

The firm launched with $750 million in assets and ended the first quarter with $804 million, Lai says. The goal is to reach the $1 billion mark by the end of the year.

Some of the challenges of going solo stem from clients’ potential perception of disruption, Lai says. “Our team is the same, but it’s always challenging to convince new prospects that it’s business as usual. People like continuity,” he says.

The first phase of the relaunch was to address those concerns and convince clients that they were not at risk.

“This has been our highest priority,” Lai says. “And also performance, which helps that transition.”

Another of the former MSIM/Invesco teams is now Lockwell Investments, which focuses on small- and smid-cap equities.

The team decided to go solo last August after considering various routes, including partnering with a private equity firm or joining a larger organization, says Brad Blalock, Lockwell’s head of distribution and client service, and the former head of consultant relations at MSIM. He did not make the move to Invesco, but rejoined some former MSIM colleagues when they spun out of Invesco to form Lockwell.

“We had talked about doing something together for a while, and this was the right time. There are not a ton of great small-cap managers with a track record,” he says. “And coming out from a large organization that had issues during the credit crisis, it was a good time to be an independent boutique.”

He adds that a benefit of being a boutique is not having to worry about quarterly earnings and asset growth. “It’s about performance, performance, performance,” he says. “And we are owners, so we get to control more of that alignment with our investors.”

Since August, the effort was to first set up the firm’s infrastructure, and then focus on the marketing aspects, he says.

“Our product is well known, so we are re-engaging consultants to our brand,” says managing director Richard Glass, who spent a brief tenure at Invesco after the acquisition.

The New York-based firm started with $1 million in seed capital and now manages $15 million in assets. Two former MSIM/Invesco clients invested with Lockwell, which, as part of the separation agreement with Invesco, was allowed to keep its track record.

The firm is launching a small-cap value mutual fund fund next month, which will have an institutional share class.

In terms of a growth target, Blalock says that the firm can manage up to $3 billion in small-cap and up to $5 billion in smid-cap. “But the goal is performance, and with performance will come assets,” he says.

Another team that left Invesco, Echo Point Investment Management, was acquired by Old Mutual Asset Management in October. CEO and lead portfolio manager Hans van den Berg is leading the international equity strategy team.

The West Conshohocken, Penn.-based firm manages $1.6 billion in assets. Officials there decline to comment for this story

Late last month, two MSIM veterans who had also joined Invesco and were on Glass’s team, joined Milwaukee-based Cortina Asset Management, as reported. They are Alexander Yaggy, who co-managed the Morgan Stanley/Van Kampen Small-Cap Value Fund and the Morgan Stanley Small-Mid Value Fund, and Andrew Storm, who was an analyst on the team.