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Monday, July 16, 2012

A Look Into USAA's New Advisory Team

Reported by Chris Cumming

Yesterday, MFWire reported that USAA [profile] has dropped Batterymarch from its $1.1 billion Small Cap Stock Fund and added two new subadvisors. After that story was posted, USAA's vice president Wasif Latif, who's in charge of subadvisory relationships, spoke with MFWire about that decision, and explained how the new subadvisors will split management duties on the fund.

Latif said that the decision to terminate Batterymarch's contract subadvising the growth side of the Small Cap Stock Fund came because "their performance had been lacking for a while." He added that USAA made the change as part of their ongoing review process.

He stressed that the decision to part ways applies only to Batterymarch's small-cap team, and that Batterymarch continues to subadvise several other USAA funds.

Those mandates include the two-star, $1.1 billion USAA Emerging Markets Fund and the three-star, $568 million USAA Capital Growth Fund

With the subtraction of Batterymarch and the addition of Cambiar and Granahan, there are four subadvisors on the USAA Small Cap Stock Fund, and the AUM is split roughly equally between them, with "a little proprietary weighting," Latif said.

Cambiar and Granahan will take over the small-cap growth portion of the fund. Cambiar will manage using a relative value strategy that's more of a small-cap core model, while Granahan will handle small-cap growth using a bottom-up selection process. Both Cambiar and Granahan are new subadvisory relationships for USAA.

A fourth subadvisor, Wellington Investment Management, who Latif said have done a "phenominal job" on the fund, will continue to manage the value portion of the AUM. In addition to this fund, Wellington also subadvises the three-star, $1.1 billion USAA Aggressive Growth Fund. USAA's relationship with Wellington on these two funds goes back about a decade, Latif said. 

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