Anthony A. Lombardi, a former co-portfolio manager on the $12.7 billion Delaware Value fund has alleged in a whistle-blower lawsuit that Macquarie Investment Management fired him and denied his 2016 bonus in retaliation for his complaint about the firm misleading investors in the fund.
In a recent complaint filed in the federal court of Pennsylvania, Lombardi alleged that Macquarie had given investors false accounts of how the firm implements its investment process and investment philosophy in various funds that he co-managed. The complaint was first reported by Ignites.com.
Specifically, Lombardi said the firm deviated from its published investment process by failing to adequately research certain equities before purchasing them, or purchasing and selling equities that did not fit the fund’s quantitative metrics as promised to investors.
He also alleged that the firm had remained intentionally overweight in certain sectors despite knowing the 'unacceptable risk' associated with them.
Lombardi, who joined the Delaware Investments in March 2004, was a senior portfolio manager on a five-person team managing concentrated, large cap value asset strategy distributed through mutual funds and separate accounts.
The team is led by Ty Nutt (pictured above), who is also named as a defendant in the lawsuit. Both Nutt and Lombardi previoulsy worked at Merrill Lynch Investment Managers on a team that was acquired by Delaware.
Delaware Investments rebranded and adopted the name of its parent company Macquarie in April this year.
A Macquarie spokeswoman said the firm would defend the case vigorously.
‘Mr. Lombardi’s claims of wrongful termination are baseless. Macquarie Investment Management takes its legal and regulatory obligations seriously,' she said. ‘Mr. Lombardi’s departure from the firm was not the result of retaliation on the part of Macquarie.'
In the documents filed with the federal court, Lombardi claimed that he was the only investment professional within the team who has any formal research publication experience, while other fund managers had to rely on him to develop the team’s research rubric.
Lombardi said that he notified Nutt when he discovered the fund was deviating from its investment process without notifying shareholders. By 2014, he routinely refused to certify or ‘sign off’ commentaries or documents provided to investors to better understand the product because of their inaccuracy, he claimed.
According to the complaint, Lombardi believed and told Nutt, his supervisor, that the inaccurate fund information that they provided to the Securities and Exchange Commission ‘constituted a violation of securities laws and regulations.’ However, Nutt did not investigate, discover or terminate the misconduct, the document claims.
Instead, Lombardi claims that Nutt shut him out of weekly team meetings in order to avoid any further complaints from him and also isolated him from making investment decisions.
The complaint mentioned that Lombardi had also complained through email to Mike Hogan, then head of equity investments at Delaware, about the team’s alleged misconduct and potential breach of fiduciary duties. In response, Hogan issued a verbal warning in which he threatened to fire Lombardi and demanded a written apology if he wished to remain employed, according to the legal document.
From late 2015 to early 2016, as he continued to make complaints about the fund’s alleged deviation from its stated investment process, Lombardi alleged that he received further retaliations including exclusions from team meetings, isolation from other team members and pressure to author inaccurate research in a rush.
The document states that he was terminated on February 9 2016 and was given the reason that he and the firm were ‘going in a different direction.’
Currently managed by Nutt, Robert A. Vogel, Nikhil G. Lalvani and Kristen E. Bartholdson, the Delaware Value fund has returned 25.9% over the past three years until the end of October and ranks 46 out of 101 Large-Cap Value funds tracked by Citywire.
Over 10 years the fund performs better, ranking 12 out of 78 funds for total returns and seventh for risk-adjusted returns.
With $12.7 billion in assets the fund is the sixth largest in the category with a 5.9% market share, according to data from Citywire Discovery.