The academic debate between two former Dutch professors, one expounding the efficient market hypothesis and the other the active inefficient approach has contributed to the creation of a new Dutch asset management company.

Palladyne Asset Management, which began operating last month, as part of the US group United Asset Management Corporation (UAM), has four key members of the quantitative department of the former Fortis Investment at its core. This team is led by Erik van Dijk, a former Amsterdam professor, whose investment style involves actively seeking inefficiencies in the market.

With Fortis seeking to integrate its asset management group with MeesPierson as quickly as possible last year, this group found itself facing integration with MeesPierson's quantitative team which offered passive-plus investments and was headed by Roberto Wessells, a former Rotterdam professor who expounds the traditional efficient market hypothesis.

We decided in an amicable way to split. The whole situation would be different if Fortis were not part of an insurance group," says van Dijk who is cheif executiveofficer and director of research at the new company while Wessells now heads the merged asset management team at Fortis.

"We discussed rebuilding as an asset management operation in a multi-style way. But when you are within a larger group like Fortis multi-style appears to make the organisational structure more complicated," he adds.

"There was also a problem about who would be in charge. If Roberto were leading me, that would be a statement that the passive-plus traditional approach was prevalent over our inefficiency based approach. That would look very strange in the


Van Dijk stresses that both Palladyne and its parent see the Dutch and wider European markets becoming increasingly focused on active asset management combined with risk control. The UAM link will also see these products offered to US institutions.

Initially Palladyne will offer a Dutch equity product with active security selection, a currency management product and a global tactical asset allocation product. It is also developing a European equity product, a Dutch/US, long/short equity product and a private equity product involving portfolio optimisation.

"The European equity product is based on the Dutch equity product and will be a core one especially after the single currency," says van Dijk.

"In a smaller market, such as the Dutch there is often a problem for hedge funds with too few stocks to short. But by combining it with a larger market and creating an optimiser - finding a US company that proxies for the Dutch company - you create a hedge strategy for a smaller market. The experience may also be helpful in developing long/short US European product." John Lappin"