Junk-Bond Star Is a Bully Who Terrified Subordinates, Peers Say
(Bloomberg) -- Expletive-laced rants and physical threats. Punched walls and broken phones. Emails ripping junior colleagues.
Even by the standards of Wall Street, which has long celebrated outsize egos and unapologetic machismo, such unruly workplace behavior today would hardly be passable, at least publicly.
But at Post Advisory Group, a $17 billion junk-bond firm in West Los Angeles, employees have endured all that and more as top management repeatedly fell back on half measures, people familiar with the matter said.
The story, pieced together from court documents, interviews with current and former employees and others familiar with Post Advisory’s inner workings, revolves around Henry Chyung, the firm’s chief investment officer. It paints a picture of a hot-headed CIO who routinely bullied and intimidated his colleagues with relative impunity for years, in spite of a rash of staff departures and repeated complaints by senior employees.
In today’s #MeToo era, much has been made of corporate America’s reckoning with what is acceptable workplace behavior. While the accusations against Chyung don’t allege sexual misconduct and some of the details have been aired publicly in the past, Post Advisory’s longstanding internal troubles underscore how Wall Street firms are still struggling to come to grips with the excesses of the industry’s bro culture -- particularly when the bottom line is at stake.
In spite of it all, senior executives at Post Advisory’s parent, Principal Financial Group Inc., have stuck by their star bond manager, and by some accounts, tried to paper over the situation instead.
When reached by phone, Chyung declined to comment and directed all questions to Principal. Jane Slusark, spokeswoman at Principal, declined to directly address the allegations concerning Chyung’s workplace behavior, citing its privacy and confidentiality policy related to personnel matters.
She said in an emailed statement that Post Advisory is “focused on building a great firm with a stronger workplace culture” and has seen reduced staff turnover in recent years. A “team-oriented approach” has also helped boost assets under management to over $17 billion from $10 billion in 2015.
The firm is “committed to looking for ways to continue building on these positive results,” Slusark wrote, pointing to coaching resources, professional development plans, flexible work arrangements and regular assessments of workloads for all employees. “This is an ongoing effort.”
Chyung, 49, cut his teeth at junk-bond powerhouse Donaldson Lufkin & Jenrette, and was publicly named Post Advisory’s co-CIO along with Jeremy Sagi at the end of 2013 after founder Larry Post left the firm. Sagi also departed shortly thereafter and Chyung took over as sole CIO, gaining wide latitude over Post Advisory’s operations.
Standing well over six feet tall, Chyung is an imposing figure with a notoriously combustible temperament. F-bombs are often dropped and Chyung has made a habit of barging into colleagues’ offices to dress them down, people familiar with the matter said. He brooks little dissent and will often marginalize or bully those who disagree with him, they said.
In a long-running legal spat between Post Advisory and ex-executives including Larry Post, court documents filed in late July describe employees complaining to HR personnel about a toxic workplace where “yelling, screaming, hitting or throwing objects” was the norm.
According to people familiar with the situation, the allegations have piled up since -- including an incident where Chyung threatened his boss to a fight at the office -- but Chyung remains Post Advisory’s highest-ranking investment manager. And over the years, Principal, one of America’s biggest life insurers, has largely resisted calls by Larry Post and other former executives to limit Chyung’s role.
One reason might simply have to do with Post Advisory’s performance under Chyung’s stewardship. Principal owns a handful of money managers like Post Advisory and markets them to its pension clients. The Ohio Public Employees Retirement System, California State Teachers’ Retirement System and the Montana Board of Investments are among its investors.
Post Advisory’s representative unconstrained high-yield account has generated an annualized return of 8.8 percent over the previous six years, according to investor documents seen by Bloomberg. That’s greater than the 7.4 percent annual gain for a broad universe of high-yield bonds.
Larry Post, who made his own name in high-yield debt at Drexel Burnham Lambert and Salomon Brothers, saw Chyung’s promise and suggested to the board in 2012 that the then-senior portfolio manager was a “correct choice” to be his successor, court documents showed.
The first hints of internal strife came to light in 2014, when attorneys for the ex-executives described an unnamed employee who “punched walls, broke phones, threw pens and slammed doors in employees’ faces,” court documents said. At the time, people familiar with the matter identified Chyung as the employee, although Chyung said that he didn’t punch walls. The insurer dispatched its own HR reps on several occasions to smooth things over, the people said. Earlier, Principal hired a corporate consultant to “restore harmony,” the court documents said.
Some former managers also suggested that Chyung undergo professional coaching and asked the firm to institute a policy to compel him to disclose his trading decisions to others on the investment team, court documents said. They cited a partially redacted “trade incident” for fracturing the managers’ trust. The proposals were generally rejected, according to the court documents.
That’s not to say the internal discord was all Chyung’s fault. An arbitrator in the legal spat between Larry Post and Post Advisory concluded Chyung “was not the only source of conflict,” a copy of an April decision filed in Los Angeles Superior Court on July 24 showed. Nevertheless, he was the sole employee called out by the arbitrator for his “persistently volatile temperament.”
(The arbitration stems from a dispute over whether Larry Post and two former executives, the aforementioned Sagi and Sanije Perrett, violated agreements including a non-compete clause when they left the firm. Sagi and Perrett formed Arena Capital and Larry Post became a partner there. The arbitrator didn’t find that any of the ex-employees breached their fiduciary duty, stole confidential information or trade secrets. However, the arbitrator ordered Larry Post to pay $2.5 million in damages and all three to reimburse certain expenses after they failed to show they acted in the firm’s best interests. The founder has asked a judge to strike the award.)
Whatever the case, Principal did little to make the situation better, the people said. People close to the bond shop still chatter about an incident roughly a year ago between Chyung and Jim McCaughan, who oversees Principal’s $430 billion asset-management business. During a particularly tense, closed-door meeting between McCaughan and senior Post Advisory staff at its headquarters, tempers flared. Chyung yelled at the smaller, 65-year-old McCaughan, and went so far as to threaten to fight him in the conference room, according to people familiar with the incident.
McCaughan and Principal declined to comment, according to Slusark, who cited the company’s privacy and confidentiality policy.
In the months following the blowup, McCaughan finally moved to clip Chyung’s wings, installing Christopher Reddy as president to oversee operations and naming Jeffrey Stroll as Post Advisory’s deputy CIO. Chyung also started to work remotely earlier this year, often for weeks at a time, and comes into the office less, people with knowledge of the matter said. Principal says Chyung decided to take advantage of the firm’s flexible work program.
The changes have coincided with Post Advisory’s recent spell of lackluster returns. But it’s worth noting that Chyung remains the CIO and retains broad discretion over the firm’s investment decisions. The combative and tough culture that McCaughan publicly defended in years past also remains a sore point for many inside the firm.
For his part, Larry Post’s support of Chyung evaporated soon before he left. He wrote to McCaughan to criticize Chyung’s outbursts and to warn that clients were getting wind of the internal dysfunction when they asked ex-employees about their sudden departures, according to court documents.
“The path always leads back to him,” he wrote.
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