Many star stock pickers have left mutual funds in recent years for the allure and riches of hedge funds, but not renowned value manager John Schneider, who oversaw $12 billion at PEA Capital in New York. When Schneider left the Allianz-Pimco affiliate last month -- after posting stellar five-year returns of 18.80 percent and 15.74 percent, respectively, for the Pimco PEA Renaissance Fund and the Pimco PEA Value Fund -- he decided to stay long-only. He opened his new firm, J.S. Asset Management, with backing from Stellate Partners, founded in December by Paul Greenwood, former U.S. equities chief at Frank Russell. Greenwood is looking to form partnerships with what he calls “proven talent like John Schneider.”
By setting up shop in West Conshohocken, Pennsylvania, “I cut my commute from two hours to ten minutes,” says Schneider, 40, a resident of nearby Haverford. Schneider had spent six years with PEA and before that 13 years at such firms as Wilmington Capital Management and Newbolds Asset Management. He now works with two analysts and an office manager and outsources trading, operations, marketing and compliance to Stellate’s Charlotte, North Carolina, headquarters.
“There are other people who offer deals like this, but they want to own the company,” says Schneider. “Stellate lets the investment manager keep majority ownership, and the arrangement is flexible. When my assets get to about $1 billion, where I can justify having my own traders, I can take that function in-house.”
Schneider plans to replicate what he did at PEA, with a large-cap value fund and an all-cap value fund. Will there be a hedge fund, too? “The near-term strategy is long-only, but it’s good also to have a hedge fund in the mix -- maybe in a few months,” he says. Being strictly long-short just doesn’t appeal to him: “If you fall below the high-water mark for six months, the clock starts ticking, and the whole organization can fall apart.”
