OppenheimerFunds reshuffles, lays off workers

Firm shakes up marketing department, creates new divisions; also adds new lawyer to senior staff

May 4, 2010 @ 3:43 pm

By Jessica Marquez

OppenheimerFunds has reorganized its marketing department, laying off about 20 employees and creating a division dedicated to providing investment commentary and research to clients.

The shake-up comes as the firm tries to reverse months of poor performance in its bond funds. OppenheimerFunds is also facing a number of lawsuits from states over its Section 529 plans.

Marty Willis, chief marketing officer, held a town hall meeting May 3 for OppenheimerFunds employees to announce the reorganization.

“We are changing our business model to be more customer-focused and to strengthen our investment-marketing expertise,” Robert Grill, senior vice president of marketing at OppenheimerFunds, said in an interview. “To do that, we need to get the right talent levels in the right places.”

Ms. Willis, a 25-year Fidelity Investments veteran, joined OppenheimerFunds in September to help the firm revamp its marketing strategy.

As part of her plan, Ms. Willis has created an investment services group, which will be made up of nine people and will focus on putting together investment management commentary to clients, Mr. Grill said. “There are a lot of smart people here, and we haven't done a great job of letting the world know what we think,” Mr. Grill said.

OppenheimerFunds has tapped Lori Heinel, who was managing director and head of investment solutions at Citi Private Bank, to head the new group. Ms. Heinel's first day is Aug. 1.

Separately, OppenheimerFunds has hired Ari Gabinet, the former head of securities litigation at The Vanguard Group Inc., as general counsel, asset management. Bob Zack, OppenheimerFunds' general counsel, will remain in his position. The hiring means Mr. Zack will able to focus more on strategic-business issues while Mr. Gabinet handles day-to-day legal issues, Mr. Grill said.

Given the events over the last several months, hiring more legal staff probably makes sense for OppenheimerFunds. In November, the firm paid $20 million to settle a lawsuit with Oregon over its management of the state's 529 plan. In December, the firm agreed to pay $44.23 million to the state of Illinois over its 529 plan.

The lawsuits alleged that OppenheimerFunds 529 plan managers invested too heavily in the company's' Core Bond Fund, which had place sizeable bets on subprime and higher-risk securities. The fund lost 36% of its value in 2008.

Getting portfolio manager commentary in front of investors may help OppenheimerFunds, but it remains to be seen if the firm will be able to turn itself around, said David Kathman, a mutual fund analyst at Morningstar Inc. “People are still shaken up over what happened with its bond funds,” he said.

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