Philadelphia investment firm Swarthmore Group, managing $1.5 billion, is shutting down

Dayana Jones

Swarthmore Group, the Philadelphia stock-and-bond investment firm started by lawyer-turned-prominent finance professional James Nevels in 1991, will go out of business on Thursday, according to employees and industry sources.

“Very frustrating. (We were) only given two weeks’ notice,” said one of a group of staffers who spoke on the condition their names not be used because they were not authorized to discuss the shutdown.

The firm, with a staff of about 10, managed $1.5 billion as of March 30, including about $400 million in stocks, for clients including the City of Philadelphia and other governments, corporations, and charities, according to Securities and Exchange Commission records. Past clients have included the Pennsylvania state employees’ (SERS) and county employees’ pension plans in the Philadelphia suburbs.

Swarthmore managed $122 million in Philadelphia’s airport debt-payment account until last Friday, city spokesperson Kevin Lessard said. The funds were sent to a different firm after Swarthmore “told the city that they were closing” effective June 30, he added.

A popular choice of Republican officials and business people for high-profile boards, Nevels is a past chairman of Hershey Co., the Federal Reserve Bank of Philadelphia, the federal pension finance agency, and the former state-controlled school boards in both Philadelphia and Chester-Upland.

Nevels didn’t return calls to his Philadelphia offices seeking comment on Swarthmore’s closing.

Independent investment firms have come under pressure in recent years as Vanguard Group, Charles Schwab and other low-fee mass-marketers attracted more savers. Pressure built as both stocks and bonds dropped sharply in value in early 2022, amid rising Federal Reserve interest rates designed to curb inflation and the Russian invasion of Ukraine, which sent food and grain costs higher and slowed the world economy.

Investment firm owners who plan to retire often sell their firms and clients to senior staff if they can’t find outside buyers. But some also simply shut down, leaving clients and staff to go elsewhere.

In April, trustees of the Friess Brandywine Fund, founded in 1974 by the late money manager and conservative political activist Foster Friess, who once managed more than $20 billion, voted to shut down and lay off staff. In 2020, trustees of King of Prussia-based Schneider Capital Management voted to liquidate their RBB Fund.

The value of stocks Swarthmore managed for its clients had declined since 2015, from more than $1 billion to about $400 million, according to SEC reports. The firm charged fees ranging from 0.25% of the bonds it bought for clients to 1% of the value of clients’ stocks, with discounts for those investing more than $5 million.

The firm’s past clients included the state pension system, SERS, as well as Bucks, Chester and Montgomery Counties. Each fired the firm for missing performance goals in the early 2010s, as more pension funds switched to low-cost index-based investing.

Glenn Becker, a former president of the Swarthmore Group, is now chairman of SERS’s investment committee, which hires money managers for more than $40 billion in state funds.

A graduate of the University of Pennsylvania’s Wharton and law schools, Nevels began his career as a bond lawyer at Buchanan Ingersoll in 1978, before serving as a municipal bond analyst for Wall Street firms, then setting up Swarthmore.

Before heading the state board overseeing Philadelphia school finances from 2001 to 2007, Nevels served on the Board of Control that ran Chester-Upland Schools from 1998 to 2001. President George H.W. Bush appointed Nevels to the federal Pension Benefit Guaranty Corp., which he chaired from 2005 to 2007.

Nevels was also a director of the former Tasty Baking Co., a trustee of Bucknell and St. Joseph’s Universities, and served on advisory boards at Penn, Drexel and Temple. Besides chairing the Hershey Co. board, he was a director of Hershey Trust Co. and the Milton Hershey School.

https://www.inquirer.com/business/swarthmore-group-james-nevels-investment-advisor-pensions-shutdown-20220629.html

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