both managers are going on gardening leave until legal proceedings are concluded
George Luckraft and Nigel Thomas have left ABN Amro before replacement managers have been found. However, the pair are to remain on gardening leave and will not join Framlington until legal proceedings have concluded.
ABN Amro issued an injunction to stop Luckraft and Thomas beginning work at Framlington immediately, which was lifted by the high court on Friday and replaced by an identical undertaking by the pair, both groups said.
This undertaking cannot be legally challenged and, if breached, would lead to more legal charges against them.
ABN claims Luckraft and Thomas are still under contract but both managers will now stay at home until the court case is heard in July.
Luckraft and Thomas announced their departure from ABN at Easter and were expected to see out their 12-month contracts. However, both claim that since their notice was handed in, certain actions taken by ABN have caused an irrevocable breakdown in their working relationship, making their position untenable. As a result, they are claiming constructive dismissal.
ABN claims there is no substance to these allegations. Global chief executive Tom Cross Brown said: 'We unreservedly reject Thomas and Luckraft's claims that we have in any way caused a breach of contract. We will do anything to protect the interests of clients and the company.'
Craig Walton, marketing director at Framlington, said: 'We are confident Thomas and Luckraft will be vindicated in their trial for breach of contract and it is regrettable it had to go to court. We remain hopeful a sensible compromise on a starting date for them will be agreed with ABN.'
When Thomas and Luckraft announced their resignation in April, ABN put a full bid offer spread on all the funds to make sure they were dealing at the right price and protect unitholders wishing to remain in the funds.
To fill the gap left by Thomas and Luckraft, ABN has given interim positions to James Cotton to manage UK Growth and UK Select Opportunities, and Adam Gray to manage Luckraft's Equity Income fund and co-manage High Income with fixed income specialist Dan James.
Cotton joined ABN before the launch of UK Select Opportunities and helped Thomas with stock selection, especially on the UK smaller companies side, ABN said. Gray has been part of ABN's UK equity team for the past 12 months and has been responsible for managing private client mandates.
Raj Basra, analyst at private client portfolio manager Gerrards, has put all five funds Thomas and Luckraft managed on sell recommendations as a result of their early departure.
He said: 'The heavy reliance of these funds on Luckraft and Thomas has been well documented and there is no experienced substitute in place.'
'Due to the specialist nature of this fund and with no experienced management in situ to provide continuity, we recommend selling the unit trusts at the earliest opportunity.'
Nick Wells, product and communications director at ABN, said the group's recruiting process is still going forward. He said the group is looking to hire up to three UK fund managers to cover the funds left by the two star managers.
When Thomas and Luckraft join Framlington after legal proceedings have been dealt with, it is expected that Thomas will take on the Capital Trust, the UK small-cap unit trust currently managed by Richard Peirson, and turn it into a special situations-type vehicle.
Luckraft is expected to run four of Framlington's existing income funds: Extra Income, Quarterly Income, Monthly Income and UK Bond. At present Stephen Payne manages the Extra Income and Monthly Income Funds, while Chris Murphy runs Quarterly Income and UK Bond.
Mark Dampier, head of research at Hargreaves Lansdown said that from a unitholder's point of view the situation was frustrating, with many in the industry contemplating putting their money elsewhere.
Dampier said: 'This looks really bad for the industry as a whole. The last two years have been very tough for investors and this just makes it appear that unit holders come in at the bottom of the pile.'
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