Advanced Investment Shutting Down

August 30, 2002 ( - Advanced Investment Management, which has recently suffered the resignations of several pension fund clients following allegations of violating investment guidelines, is closing up shop.

In an interview with yesterday afternoon, former president and chief investment officer Tom Allen confirmed that he had assumed his former role – but only to ensure an orderly transition of the firm’s remaining clients.

“There won’t be any part of the business that will be still active.  By the end of September, there will be no more customer assets being managed here.  We’re helping people transition their portfolios to other managers, or liquidating them and providing cash balances,” according to Allen, who also said Advanced would be in their offices in Pittsburgh at least through the end of October.

Firing Line

Allen resigned earlier this month amid a firestorm of allegations from at least three pension funds.  The pension funds, San Bernadino County (California) Retirement Board, the Minneapolis Employees Retirement Fund (MERF), and the Pennsylvania State Employees’ Retirement System (SERS) all terminated their contracts with the Pittsburgh-based investment manager following an analysis by consultant Ennis Knupp.  Advanced (whose acronym “AIM” should not be confused with the Houston-based AIM funds) has continued to deny any wrongdoing.

First was the San Bernadino fund, which acted just four months after hiring Advanced.  The California fund said it had determined that Advanced’s domestic equity trades resulted in a $55-million loss to the $3.2 billion investment pool for public employees – and has reportedly chosen a law firm to pursue legal action.

A week later, officials with the $1.3 billion Minneapolis Employees Retirement Fund (MERF) accused Advanced Investment Management of causing a $27-million loss by violating the fund’s investment guidelines. The Pennsylvania State Employee’s Retirement System (SERS) followed suit in late July, citing “increased business risk.”  By early August, the $861-million Minneapolis Teachers Retirement Fund and the Tennant Company had also terminated their contract with Advanced.

Point of No Return

“There was a time there for a couple of weeks when I had stepped completely out of the business,” according to Allen.  “When we reached the point at which it looked like we were going to have to unwind the business, then neither Bill Belko (who had been tapped as the firm’s new CEO and chief investment officer following Allen’s resignation) nor I really wanted Bill to be doing that; it wasn’t what he signed up for.  I got the place started 18 years ago and I felt it appropriate for me to lead its unwinding.”

Explaining the decision to shut down, Allen acknowledged that while the firm had retained some clients, “…When we reached the economic decision point that it was in everybody’s best interest to wind the business down, we notified them that we were doing that.”

“It’s a tough thing, obviously.  I didn’t want to go this way.  But sometimes things move beyond your control.”

Still to Come?

Shutting down the firm isn’t likely to be the end of things for Advanced and Allen.  The San Bernardino County Employees’ Retirement Board has voted to retain the services of San Francisco-based Steinhart & Falconer, LLP to assess legal options regarding trades by Advanced, having tapped David J. Romanski, a former SEC assistant general counsel, as lead counsel.  Other funds are reportedly considering similar moves.