RiverSource Investments LLC has hired Richard T. LaCoff to head the Minneapolis-based firm's municipal bond group to help bolster the performance of its mutual funds.
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LaCoff -- who was formerly a senior municipal strategist at Payden & Rygel Investment Counsel -- started at RiverSource on Monday.
In his new role, LaCoff succeeds David Kerwin, who will stay on as a senior manager of the municipal group at RiverSource.
The hiring follows a period of below-average performance and lagging sales for the largest fund run by the group, the $3.3 billion RiverSource Tax-Exempt High Income Fund.
"We made the change to improve performance, drive results, and to build on the current team," Ryan Lund, a spokesman at the firm, said this week.
"We feel good about the people we had in place, but also wanted to bring in Rick, who has more than 12 years' experience as a fixed-income portfolio manager, a trader, and a strategist," Lund said. "He is someone who has an impressive track record, an impressive resume, and someone who we felt would be a strong addition to RiverSource Investments."
The high-income fund suffered the highest outflow of any muni bond fund in 2005 as its Class A shares delivered a fourth straight year of below-average total returns, according to Lipper Inc. In 2006, the high-income fund's Class A shares have so far returned just 0.57%, ranking 174th out of the 260 share classes in its peer group, according to the Denver-based fund tracker.
In an interview earlier this year, another spokesman for RiverSource said that sales of the firm's funds have suffered since its parent company's fleet of financial advisers, who previously sold only in-house funds, began offering clients funds from more than 200 different companies in the late 1990s. RiverSource is owned by Ameriprise Financial Inc., formerly known as American Express Financial Advisors, which was spun off from American Express Co. and renamed in 2005.
"A lot of RiverSource's municipal funds have been somewhat middling in recent years," Lawrence Jones, an analyst at Morningstar Inc. in Chicago, said yesterday.
"They have tried to improve them in some respects. They brought expenses down from what they were previously, which is a positive, and in the long term that will help obviously the returns," Jones added. "But so far, they kind of haven't been hugely distinguished in terms of performance and I think that's probably why we're seeing the management change."
There has been some turnover in the role since Kurt Larson, who had overseen the creation of the first municipal funds at American Express in the mid-1970s, retired at the end of 2000. He was succeeded by Terry Fettig, who retired three years later. Since then, Kerwin has served in the role.
LaCoff is the latest in a series of high-profile hirings and acquisitions made by William F. "Ted" Truscott since he was named chief investment officer and head of the firm's U.S. asset management business in 2001.
LaCoff, who had been at Payden & Rygel for nine years, rejoined that firm's municipal group in January, after spending three years in its London office, where he oversaw the European credit team and set up its trading operations. Prior to joining the Los Angeles-based investment firm, LaCoff spent five years at the Vanguard Group Inc.
At RiverSource, he will oversee a total of $13 billion in tax-exempt assets and nine mutual funds. LaCoff was not available for comment.
"Kerwin didn't have a stellar performance record, but he had done a lot to kind of draw back on some of the risks that, for example, the high-income fund was taking," Jones said.
Jones said he is hopeful given LaCoff's experience. "But in terms of how that translates into improved performance, I think that remains to be seen," he said. "The proof is going to be in the performance he can deliver and his ability to effect some changes with the way they're run." (c) 2006 The Bond Buyer and SourceMedia, Inc. All rights reserved. http://www.bondbuyer.com http://www.sourcemedia.com
