As Pilgrim, Baxter & Associates Ltd. founders Gary Pilgrim and Harold Baxter face civil complaints of improper mutual fund trading, one of the mutual fund company's largest clients has replaced it as one of its managers.

Pilgrim, Baxter & Associates was one of the five managers of the $2 billion Managers Special Equity Fund. Peter Lebovitz, chief executive of Managers Funds LLC, told the Boston Globe that the company has been replaced by Essex Investment Management LLC, a Boston-based company with $5 billion in assets. Essex and Managers Funds are units of Affiliated Managers Group Inc., a Beverly firm which invests in asset management companies.

"When a person decides to leave the firm, whether he leaves because he retires or leaves because some bad thing happens," Managers Funds automatically conducts a review to determine whether to make a change, Lebovitz said. He added that for the nine years that Pilgrim & Baxter managed the fund, they did a 'terrific job.' In the meantime, shareholders will be asked to ratify the choice of Essex by February.

Each subadviser the Managers Special Equity Fund independently oversees equal amounts of the portfolio. The four other managers are Kern Capital Management LLC, Westport Asset Management Inc., Skyline Asset Management LP and Donald Smith & Co.

Essex will manage the aggressive growth portion of the fund. Craig Lewis will serve as portfolio manager.

Managers Funds offers 21 funds, 12 under its own name and nine under the Managers AMG Funds brand.  

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