BNP Paribas' new investment unit, Fridson Investment Advisors, specializes in corporate credit and stresses transparency in an effort to stand out in a crowded field of alternative investment managers.
The firm, which is led by Marty Fridson, Richard Hollander, and Thomas Shandell, made some promises — open, frequent communication with clients, and no secret formulas — that will be difficult to live up to.
Fridson Investment offers investment management services focused on any type of debt that companies take on, ranging from bank loans to high-yield bonds, primarily in developed countries with strong creditor protection laws. Its clients will include institutional and high-net-worth individual investors.
Mr. Fridson, the investment firm's chief executive officer and chief investment officer, said that he wanted the firm to be at the opposite extreme from some quantitative-oriented hedge funds that worry about competitors' stealing their investment ideas if they speak them aloud, even to their own clients.
"We want to be responsive and strong on the client services side," Mr. Fridson said. "Nothing black box here."
Mr. Fridson declined to disclose specific growth objectives, though he did say he was looking to become a "substantial player in the market."
Fridson Investment is starting up as executives and observers press investment companies, particularly hedge funds, to better disclose information. Hedge funds are not regulated as strictly as mutual funds but continue to gain popularity among institutional and individual investors.
All of Fridson Investment's executives have spent their careers in the alternative investment arena.
About 16 years ago Mr. Hollander founded the Los Angeles firm Metropolitan West Financial LLC, a multibillion-dollar company whose businesses ranged from investment advice to securities lending. (The company was bought by Wachovia Corp. of Charlotte three years ago.)
BNP Paribas Investment Partners, the asset management unit of the Paris banking company BNP Paribas Group, recently began talks with Mr. Hollander about how they could be partners in a start-up investment firm.
After several months they agreed that BNP Paribas would provide the global distribution platform for an investment firm to be headed by Mr. Fridson, who had worked for years in high-yield research at Merrill Lynch & Co. Inc. in New York.
In addition to Mr. Fridson, BNP Paribas and Mr. Hollander enlisted Mr. Shandell to be the chief portfolio manager and Richard Schweitzer to be the chief operating officer and chief financial officer.
Mr. Shandell had co-founded Golden Tree Asset Management, and Mr. Schweitzer was chief operating officer and chief financial officer for Mr. Hollander at MetWest Financial.
"We want to go as far as we can in terms of reporting to our client base without hurting the performance of the portfolio," said Mr. Hollander, who is the new firm's chairman.
Fridson Investment will "most likely" have forums, he said, such as Webcasts or one-on-ones that give people an opportunity to ask questions. It will also probably have quarterly Q&As about its strategies, he said, as well as exploring other ways to communicate.
Mr. Fridson said that his firm would meet with clients regularly, walk them through specific illustrations of approaches that worked or did not work, and describe in detail the analysis used to arrive at investment decisions.
Mr. Fridson, who formed a high-yield research firm called FridsonVision LLC after leaving Merrill, also said he expects to produce internal commentary for clients. This would probably entail more than the typical monthly communication to keep clients abreast of developments in the credit markets, he said.
The company also plans to register with the Securities and Exchange Commission as an investment adviser, though it will not go public and have to file financial statements such as 10-Ks with the agency.
"Because we have such a strong model, we feel comfortable being transparent in the way we analyze and build portfolios," said Pierre Lapomme, the chief executive officer of BNP Paribas Asset Management Inc., the French company's U.S. subsidiary.
He said that he thinks clients will value the clarity about investment methodologies during volatile times such as these.
"There's no magic trick, except that we're associating with a successful professional and very focused on targeting this asset class," corporate debt, Mr. Lapomme said.
So far, the market has responded positively to the idea.
Mr. Fridson has "a reputation as being a guy who's been around the junk bond market for years so he's very knowledgeable," said Burton Greenwald, the president of BJ Greenwald Associates in Philadelphia.
He added that investment opportunities will abound in that landscape in the wake of all the debris that's accumulated in it.
Regarding distribution, Mr. Fridson said, "we have our own internal capabilities and the partnership with BNP at this point, but we wouldn't rule out additional arrangements. It's possible that we'll sell through third parties."
