“Even the most talented players can’t perform if you take their instruments away.” Big investment firms do this, she says, by trammeling portfolio managers in rules and restrictions. “Business risk, constraints on tracking error, approved stock lists -- all conspire to stop money managers from performing,” Ketterer contends.
She complains from experience. Ketterer, 43, used to be a portfolio manager for Hotchkis and Wiley, which oversaw $10 billion in assets. But the small firm was picked up in 1996 by Merrill Lynch, and four years later the brokerage merged Hotchkis with London’s Mercury Asset Management, creating a $560 billion colossus: Merrill Lynch Investment Managers.
Feeling increasingly constrained, Ketterer in 2001 bolted the firm co-founded by her father, John Hotchkis, and set up Causeway in Los Angeles. Her smaller-is-better formula seems to be working: Causeway’s flagship International Value Fund is up nearly 20 percent this year and has gained an average 7.5 percent annually since its inception. The firm now manages $3.4 billion and has attracted the New York State Teachers’ Retirement System. Ketterer spent part of the summer scouting for a London office in preparation for launching an international long-short fund.
She named her firm for Giant’s Causeway, a 500-foot-long formation of basaltic columns -- purported by local legend to have been a path for giants -- extending into the North Channel from Ireland’s northern coast. The firm should prosper, says Ketterer, as long as it sticks to its bottom-up valuation process, trusts its portfolio managers’ judgments -- unlike big firms -- and doesn’t succumb to giantism.
