Affinity  added Steve Figliozzi as Director of Marketing and Distribution with the responsibility of spearheading SMA and retail platform distribution. In addition, Rachel Yu was hired as a Portfolio Administrator to support the investment team and Karina Rodman joined the firm as Administrative Manager to handle administrative and client service duties. 

Now marking just over one year in business, Affinity has achieved a number of key business milestones.

Affinity Investment Advisors was chosen by Envestnet, one of the largest providers of wealth management solutions in the industry, as an approved manager: Affinity completed Portfolio Management Consultants’ (PMC) rigorous research on select asset managers and investment vehicles on behalf of Envestnet to be confirmed as an approved manager. The PMC approval process uses an objective, transparent methodology, consistent with industry best practices, to provide a broad list of approved investment managers across investment styles.

Ohio PERS selected Affinity Investment Advisors as one of 10 equity managers to run $400 million in business. Affinity Investment Advisors, a minority-owned firm, will run $40 million in domestic large caps.

The Affinity team’s long history of success is distinguished by its pragmatic quantitative approach to investment. Unique to the Affinity team is a core senior management group that has worked together for well over a decade.

“2012 may still bring volatility but I believe we are well suited to act nimbly as needed. If the US economy is to return to good health, there must be an environment that allows for positive real returns to capital. To bet against the stock market over the long term is to bet against the US economy,” said Gregory R. Lai, CFA, principal and lead portfolio manager, Affinity Investment Advisors. “We are pleased with how our multi-factor model has worked in this environment. Our investment process is constructed to identify fairly valued stocks with above average earnings growth in all economic environments. It’s given us the opportunity to grow and thrive as an independent boutique.”

Affinity has five products, primarily in Large Cap U.S. Domestic Equities. While its client base is mainly institutional, Affinity serves retail clients through advisory relationships and wrap and model accounts with nationally recognized firms. Executives also note that the firm can create custom products based on client needs.

Affinity Investment Advisors, LLC is headquartered in Irvine. For more information, call 949-660-6373 or visit www.affinityinvestment.com.

Economic conditions in the US seemed to improve during the fourth quarter, but the pace of improvement was slow. Unemployment remained very high, but by most measures the rate of job creation was accelerating. Real economic growth was positive, and the economy has avoided the feared double dip recession thus far. Real growth was about 2% in the fourth quarter which was up from less than 1.5% real growth experienced in the second and third quarters of the year. The consensus economic forecast for the next two quarters envisions real growth rising to 2.5%.

While the trends in real growth and job creation are improving, they remain far below the historical averages for this stage of an economic recovery. There are many explanations for this phenomenon, but two seem the most cogent. The first is the residual trauma following the financial dislocations of 2008 and 2009. Financial institutions, corporations, and individuals are trying to ascertain what levels of liquidity will be necessary in an environment in which access to capital markets is not assured, and the rules for access are changing. The primary response to the threat of renewed duress in the financial markets has been to increase cash balances on average; deleveraging.

The second explanation is the emergence of greater uncertainty in the global economic and political spheres. The potential for disruptions created by a rending of the EU and the Euro block as a result of possible debt payment defaults by several countries has roiled debt markets. The seemingly intractable nature of the underlying problems in countries like Greece, Italy, Spain, Portugal, and Ireland, have driven interest rates on the sovereign debt of these nations to very high levels. Moreover, each attempt by the ECB or the IMF to mollify markets has been seen as no more than a temporary fix.

The EU countries represent a demand for US goods, and the debt of these countries is held by US and foreign banks. Thus, a serious disruption in economic activity in Europe likely would slow down economic activity in the US and require US banks to raise more capital and reduce new lending. A default on debt payments by an EU member would stimulate questions about capital adequacy, decrease the willingness of banks to lend, and reduce the access to capital.

The range of potential economic and market conditions going forward has no measurable bounds. The outcomes are uncertain. The stock market has excellent mechanisms for coping with risk, but no adequate method for evaluating uncertainty. As Nobel Laureate Frank Knight observed years ago; risk can be measured and quantified, but uncertainty cannot. In 2011 the stock market behaved as if market participants were waiting for some indication that uncertainty would be of less concern.

While the near term outlook for the path of economic growth and corporate profits remains uncertain and there will be many reasons offered to avoid investing in stocks in coming months, simple facts remain; the US economy is resilient and adaptable. If more than 200 years of history is a reliable guide, current economic difficulties will be overcome. Therefore, as we enter a new quarter, we should expect that when the snow melts in the spring, it is likely that while we will still be grappling with economic problems we should have a much better indication of their dimensions and a commensurate increase in optimism.

Affinity was first launched as an independent firm in 1992. It was acquired in 2007 by Morgan Stanley Investment Management. The team joined Invesco in June 2010 when it purchased Morgan Stanley’s retail asset management team business.

Gregory Lai, lead portfolio manager for Affinity, noted that by re-entering the market as an indepedent, Affinity will better be able to serve clients as they can have more direct contacts, and will capitalize on the increasing investor interest in boutique management firms.

“Our core team is still in place with the same culture and reputation, which is to put clients first, both in performance and service,” Lai added.

Affinity is led by Lai and Jeffrey Randolph as COO. Affinity’s management team consists of Stephen Pelensky, senior portfolio manager; Michael Petrino, senior portfolio manager; Jordan Floriani, portfolio manager; and Emmy Chang, senior associate. The firm has approximately $700 million in assets under management, predominantly from institutional clients.

The Affinity team’s long history of success is based on its pragmatic quantitative approach to investment. Unique to the Affinity team is a core senior management group that has worked together for well over a decade, despite changes in the brand.

“The money management industry is changing. Affinity is ready to embrace the changes as an independent boutique platform and feel that we have a structure and team that is well prepared for a new world,” added Lai.

Affinity has five products, primarily in Large Cap U.S. Domestic Equities. While its client base is mainly institutional, Affinity serves retail clients through advisory relationships and wrap and model accounts with nationally recognized firms. Executives also note that the firm can create custom products based on client need

Affinity Investment Advisors, LLC is headquartered in Irvine. For more information, call 949-251-2340 or visit www.affinityinvestment.com.

A long-time Morgan Stanley Investment Management executive has rejoined some fellow MSIM veterans and will lead the distribution efforts for a firm that recently spun out of Invesco. Steve Figliozzi has joined Affinity Investment Advisors as director of marketing and distribution, the firm announced late last month.

Affinity is a large-cap equity manager that had been part of MSIM but moved to Invesco when that firm bought most of MSIM’s retail business last year. Affinity spun itself out of Invesco in November.

Figliozzi spent 17 years at Morgan Stanley, most recently as director of separately managed accounts. He too moved to Invesco in the acquisition, but officially left that firm on June 1, the same day he joined, he says. At Affinity, Figliozzi will spearhead distribution into the institutional and high-net-worth markets.

“This is our first step as we build out our team to better service our clients,” says Gregory Lai, managing partner at Affinity. “We’re looking to add people with the same background, integrity and the same mindset that we have and since we worked with Steve, it’s the perfect fit. He knows a lot of clients, and is familiar with the team and the products.”

Asked whether the firm would make additional hires of MSIM veterans, Lai says that while the firm “has a history of getting good people and building good business,” at the moment, no further hires are planned as the firm focuses on servicing its clients.

Since leaving Invesco in June, Figliozzi did some consulting work and took some time off, he says.

Irvine, Calif.-based Affinity manages $700 million in assets and has 300 accounts. Lai declines to comment on the number of accounts that came from MSIM/Invesco.

Lai founded Affinity as an independent firm in 1992; MSIM acquired it in 2007.

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.

A six-member domestic large-cap equity management team led by Gregory R. Lai, which joined Invesco as part of its purchase of Morgan Stanley Investment Management’s retail business earlier this year, left to launch a new independent boutique under an old name, Affinity Investment Advisors.

In a telephone interview, Mr. Lai said the move brings Affinity full circle. Affinity had been an independent boutique from 1992 through May 2007, when it was acquired by Morgan Stanley Investment Management.

The team — comprising Mr. Lai as lead portfolio manager; Jeffrey L. Randolph as COO; Jordan Floriani, Stephen Pelensky and Michael Petrino as portfolio managers; and Emmy Chang, as senior analyst — remains intact, Mr. Lai said.

While praising both MSIM and Invesco for the resources and support those firms provided to the team, Mr. Lai said Affinity will look to remain independent.

Although his team was included in the sale of MSIM’s retail business to Invesco, Mr. Lai said institutional clients accounted for the bulk of the money Affinity team was managing.

According to the firm’s August ADV filing with the SEC, Affinity Investment Advisors has about $600 million in assets under management.

Invesco spokesman David Bachert confirmed that Mr. Lai’s team has left Invesco. He declined to provide further details.

A team of large-cap portfolio managers has returned to independence after a few years with Morgan Stanley Investment Management and a few months with Invesco. The team, led by Gregory Lai, has reformed its pre-Morgan Stanley institutionally-focused equity manager, Affinity Investment Advisors. It’s at least the second team to leave Invesco since that firm purchased Morgan Stanley’s retail asset management business.

Lai and his team joined Invesco when that deal closed on June 1, but were taken off their retail mandates on June 25. They kept managing separate account assets until October 29, their last day at the firm, says Lai. Affinity, based in Irvine, Calif., was officially launched November 1.

A spokesman for Invesco says that the move was intended to “reduce overlap in portfolio management capabilities and create scale within investment teams for the benefit of fund shareholders.” The firm doesn’t expect any other teams to be spinning out of the firm as the acquisition dust settles.

Lai says that Affinity launched with approximately $700 million in assets under management, most of them from institutional clients. He declines to comment on the terms of the transaction and on the number of clients who made the transition from Invesco.

He says that now is a great time to be an independent firm, especially in the large-cap space, which he views as one of the most undervalued sectors.

“Particularly ones that have a global presence, so it’s a great time. And we’ve also been doing this for the past two decades,” he says.

Lai first launched Affinity as an independent firm in 1992; Morgan Stanley Investment Management acquired it in 2007.

“Our core team is still in place with the same culture and reputation, which is to put clients first, both in performance and service,” Lai says.

The team includes Stephen Pelensky, senior portfolio manager; Michael Petrino, senior portfolio manager; Jordan Floriani, portfolio manager; Emmy Chang, senior associate; and Jeffrey Randolph, COO.

Lai says that by regaining its independence, Affininty will better be able to serve clients as they can have more direct contacts, and will capitalize on the increasing investor interest in boutique management firms.

Roger Hartley, managing member at Mitchell Hartley Advisers, an investment banking boutique focusing on the asset management industry, who has known Lai professionally, says that Lai’s move is not surprising.

“I think it’s a positive thing. Greg is someone that has built a nice business before and I think he’ll do well in this new environment,” Hartley says. “Right now boutiques are in demand, particularly boutiques that have well-defined transparent investment processes, which is what he has.”

Affinity has five products, primarily in large-cap U.S. domestic equities. The firm will keep its products’ track records.

Lai says that he and his team will capitalize on the success of the firm’s first iteration to meet the changes and challenges of today’s marketplace. “We are ready to embrace the changes with this platform and feel that we have a structure and team that is well prepared for a new world,” he says.

He says that one of the biggest challenges is getting clients to understand that equities, particularly U.S. large-cap equities, may be the better performing asset class over the long-term.

The firm will make some marketing hires over the next year, he says, but for now the portfolio managers will handle most of the sales and service.

Affinity is the second portfolio team to leave Invesco in the wake of the Morgan Stanley acquisition.

Last month, Old Mutual Asset Management acquired international growth equity team Echo Point Investment Management from Invesco, as reported.

In that instance, a spokesperson for Invesco had also cited “overlap” to explain the move. The team’s members became Invesco employees in June and the firm helped in the search for a better fit.

“The acquisition had little overlap, but this is a case where we already have a well-established international growth equity team based in Texas,” the spokesperson said at the time.

That international equity strategy team is led by CEO Hans van den Berg and has $1.6 billion in assets under management, all of it for institutional clients.

Lai says that his team is very close to the Echo Point team and thinks highly of them.

The Invesco spokesperson says that there are no anticipated additional spin-offs and that the firm has “been clear to our clients in all of our communications.”

According to a note to clients, as part of Invesco’s realignment of its investment teams following the acquisition, the firm is reviewing the full Invesco product line.

“We anticipate this process will take nine to 12 months to complete, as any changes to U.S. funds must receive regulatory required approvals,” according to the note.

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