McDonnell Investment Management, an Oak Brook, Ill.-based fixed-income shop, is building a leveraged loan and high-yield platform with some familiar names. Brian Good and Jim Fellows, portfolio managers from Columbia Management Advisors, have joined McDonnell as managing directors and co-heads of a recently formed credit strategies group.
Robert Hickey, formerly the head of high-yield and investment grade corporate credit at INVESCO, has been brought on board as a managing director and senior portfolio manager and Columbia’s ex-bank loan trader, Steven Krull, is the most recent addition.
McDonnell is principally an investment-grade firm managing $8 billion in fixed-income assets, noted Jim Boyne, chief operating officer. “We’ve been looking at diversifying the product mix for some time,” he explained. The interest-neutral nature of bank loans makes it an appealing product, Boyne said. McDonnell also manages some high-yield assets for clients on an opportunistic basis, but the firm did not have the bench strength to be in the leveraged sphere fully, he added. The firm is gravitating toward loans rather than high-yield bonds.
“Our strategy will be both institutional and retail. We are working with parties on doing a closed-end fund and a structured product,” he said. The firm is in the early stages of doing both and hopes to have one product up and running in the fall. McDonnell serves as sub-adviser on several funds already and though it does not have structured products, several people at the firm have considerable experience in the structured product area, Boyne noted. One loan salesman concurred, noting that the Columbia loan team was one of the most highly regarded in the market.
McDonnell was created in 2001 when Van Kampen spun off its fixed-income separate account management business to Dennis McDonnell, former president and chief operating officer of the investment advisory group and Edward Treichel, the former executive director of Van Kampen’s institutional asset management business. Good and Fellows were at Van Kampen until 1998 and prior to being at INVESCO, Hickey was once director of corporate bonds at Van Kampen.
The Columbia pros left the firm after the bank loan business was bought by Highland Capital Management. The sale was deemed necessary when Bank of America merged with Fleet Bank. Columbia's mutual funds business, which was affiliated to Fleet, was restricted from buying loans originated by Fleet under the Investment Company Act of 1940. The 40 Act was not a big problem when the mutual funds were unable to buy just Fleet loans, but a combined Fleet/B of A creates a bank loan behemoth that represents too significant a chunk of the leveraged loan market to avoid (LMW, 4/16). Columbia had $2.7 billion in bank loan assets under management.