By Robert Stock After the loss of a number of pension mandates over the past year, Scottish Widows ...
By Robert Stock
After the loss of a number of pension mandates over the past year, Scottish Widows is trying to redefine its investment processes under new leadership with Sandy Nairn as chief investment officer.
When Scottish Widows Investment Management (SWIM) and Hill Samuel Asset Management (HSAM) were merged at midnight on 30 June, the seventh largest asset management business in the UK with over £90bn in assets was created, but the resulting group is not viewed as a top ranking investment house. Since March 2000 the group has attracted £152m in new business but £2.46bn has either gone or is going elsewhere. This figure represents 30 institutional clients and represents 2.7% of total assets or 8.9% of institutional funds.
A flood of defections by leading fund managers, including the newly appointed chief investment officer Orie Dudley, have stripped the newly created Scottish Widows Investment Partnership (SWIP) of many of its brightest names and investment performance of the combined retail fund range is not strong.
Information flow has been sporadic and the IFA community has been left guessing about the groups intentions to rationalisation its 100-plus unit trust range which includes Scottish Widows, Hill Samuel and Abbey Life branded funds, and what changes will be made to the investment process to turn around performance.
Anna Bowes, a savings and investments manager at Chase deVere, said the newly combined group has not been keeping IFAs informed about what strategies, if any, it is putting into place to turn investment performance around.
She said: "They have not volunteered any information to say what they are doing at all, so from the outside it does not look like they are doing a great deal."
That view is largely shared by Ben Yearsley, an investment manager at Hargreaves Lansdown. He said that as a result of the relocation and resignations of key personnel, Scottish Widows was now beginning from a standing start.
The creation of SWIP started with the purchase of TSB by Lloyds in 1995. TSB had previously bought Hill Samuel in 1987 and merged its fund range with Hill Samuel's and created HSAM. Lloyds bought Scottish Widows in 1999 and merged it with HSAM to form SWIP. Existing Lloyds TSB retail funds were rebranded under the name Scottish Widows.
The other retail unit trust range that SWIP manages is the former Abbey Life stable branded under the name Abbey. None of these funds have a Standard & Poor's rating and one of the only funds from this range that stands out is Abbey US Emerging Companies. The fund is ranked one out of 79 funds, offer to bid, over three years to 29 November, on returns of 207%. Over one year the fund is five out of 87 funds but over three months to 29 November the fund is ranked 86 out of 87, bid to bid, with returns of -18.5%.
Moving the Hill Samuel operation up to Edinburgh was cited as the reason for a number of high profile defections to other groups.
Katherine Garrett-Cox took her team of four US fund managers to Aberdeen Asset Management where she now heads the Aberdeen North America Fund and the new Global Champions Fund.
That headline move was matched when Old Mutual Asset Management secured the services of a team of lead fund managers from Hill Samuel headed up by John Ainsworth. The team is Fiona Hathorn, who was the HSAM head of Far East and global emerging markets, Peter Baxter, who was effectively working as HSAM chief investment officer, Adrian Farthing, who was head of continental European equities, and Ashton Bradbury, who is best known as a small cap manager but at HSAM also headed up mid-cap research.
Respected European fund manager Albert Morillo also left SWIM in 1999, ahead of the merger with Hill Samuel. His departure was a severe blow as the Scottish Widows European Fund was one of the few funds that was actively marketed to investment IFAs. His investment team has remained with the group. Over three years to 29 November the fund is ranked 20 out of 91 funds, while over one year it is 36 out of 99 and over three months it is ranked 71 out of 103 in the European ex UK sector.
The head of the new combined group was Orie Dudley, who combined the role of chief executive and chief investment officer.
Dudley, who had had the same role at SWIM, took up his new role in June, however by September he had resigned to become chief investment officer with the Chicago-based Northern Trust Corporation.
Deputy chief executive of Scottish Widows Bill Main took over as chief executive officer and Dudley's role of CIO was filled by Sandy Nairn who was recruited from Templeton Global Equity Group where he was director of global equity research.
When HSAM and SWIM were combined earlier this year, the heads of desk were: Andrew November for global strategy, Mike Corless for UK equities, Fiona MacRae for European equities, Alan Denholm for US, Anne-Marie Main for Japanese equities, Neil Mackay for Asia Pacific equities, Kim Cathechis for emerging markets, Alan Reid on the fixed income desk and Tom Laidlaw heading up property.
Mike Corless, soon departed and Denholm took over as acting head of UK which manages around £37bn of the £90bn of assets under management of the combined group. His deputy Christine Martyn became acting head of the US team.
Other fund managers have been added with the additions of Lloyd Brandford, NPI's director of Far Eastern equities, as an investment director on the Asia Pacific (ex-Japan) team, Jim Livingstone and Chisako Hardie as investment directors on the Japan team recruited from Scottish Mutual and Martin Currie respectively, and Athole Skinner recruited from Schroders to the European equities team.
Currently over one and three years a great many of the Scottish Widows and Hill Samuel retai
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