View more on these topics

ABN Amro adrift as fund duo jump ship

After suffering the shock of its two star fund managers resigning last month, ABN Amro has now been hit by their decision to move to Framlington with immediate effect.

Having previously been upbeat about George Luckraft and Nigel Thomas&#39 departure – as both had stated an intention to see out the remaining 12 mon-ths of their contracts – ABN has now had the rug pulled from under its feet.

With no time to placate nervous investors with suitable heavy-hitting replacements, it is now facing an exodus which could devastate its presence in the UK retail market.

Hargreaves Lansdown investment manager Ben Yearsley says: “It is a complete blow to ABN, it will just balls them up completely. Assuming there is no immediate legal action, as much as £1bn of funds under management – if not more – will walk out the door.”

Luckraft and Thomas managed around £1.3bn of the £1.46bn of UK funds ABN has under management. For a company that hopes to become a top 40 UK investment house within two years – it currently ranks around 50th in terms of funds under management – the loss of the two managers is nothing short of a disaster.

ABN now has to engage in a damage-limitation exercise to persuade IFAs to hold fire for as long as possible and keep their clients&#39 money where it is. But, as Yearsley points out, this is going to be an uphill task.

Legal action against the managers seems unlikely to help. Even if ABN goes ahead with plans to take them to court for breach of contract it appears it could only prevent them managing funds for Framlington until their contract expires next year.

This might cost Framlington a large number of transfers but it would not stop IFAs moving clients elsewhere – particularly when comparable funds are run by managers of the calibre of Bill Mott, Tony Nutt and fast emerging Tim Steer.

The other problem for ABN is that Luckraft&#39s and Thomas&#39s initial successors – James Cotton managing the UK growth and select opportunities funds, Adam Gray the UK equity income fund and Dan James and Gray the UK high-income fund – are in-house appointments with profiles lower than that of a member of the Secret Service.

Most IFAs have been left to ask who they are but it is not just intermediaries that ABN has to worry about. Multi-managers too are never shy to protect their investments.

A senior industry source says: “There is no doubt that the moves will lead to immediate reactions. There will be a flood of repurchases hitting the portfolios, which will leave those investors who do not quit with a host of illiquid stocks. I can&#39t see ABN being able to stem the flow.”

Despite the gloomy prognosis, ABN is doing its best to remain bullish, stating categorically that it will not pull out of the UK retail market, where it has doubled its funds under management to £1.5bn from £770m over the past year.

It had been talking of its plans for the UK only days before the managers&#39 departure – admitting it needed to expand its product range to enable it to achieve its aim of overtaking its rivals.

Product and communications director Nick Wells told Money Marketing last week that ABN was considering launching a fixed-interest product, which it currently lacks, and potentially a limited-issue fund.

Whether either of these will now go ahead will dep-end on ABN&#39s success in keeping its retail business afloat. In fact, there are suggestions that it will now push even harder to acquire a business that could replace its AWOL fund managers in a single stroke.

Artemis has been mooted and would represent a good fit but until Luckraft and Thomas left, it seemed more likely that the boutique – rather than ABN – would be the company most likely to be celebrating an acquisition.

The other factor is that any potential target would now be likely to add a nought or two to its asking price and unless ABN is prepared to dig deep an acquisition may be increasingly unlikely.

Directly replacing the managers seems a more feasible option but the raft of recent moves has prompted many firms to lock in their star turns for as long as possible.

However, as Luckraft and Thomas themselves have shown, agreements between fund managers and their firms are not necessarily unbreakable.

Recommended

&#39Name and shame&#39 on endowments

The Consumers&#39 Association is calling on the FSA to create league tables to name and shame companies whose endowment policies are likely to suffer shortfalls.It also wants reform of the financial advice sector to be put on hold until the FSA has addressed the issue of commission-driven sales.The consumer pressure group has written to FSA […]

Moore&#39s code

Regulators, politicians and consumer groups have spent the last 10 years knocking the stuffing out of the life industry and with some justification.After all, it has spent the last 20 years selling – or should that be misselling? – some decidedly shaky products which seem to have been designed for the 19th Century rather than […]

Partnership shape

IFAs trading as partnerships can gain valuable personal protection by converting to a limited liability partnership. Although the FSA has not yet produced specific rules for LLPs, it will generally treat an IFA LLP as a limited company.To assess whether it is advisable to change status from a partnership to LLP, consideration needs to be […]

Fears for tiers

CP121 introduces the concept of a lower tier of financial advisers to provide the mass market with low-cost advice on simple products. However, we at AT Kearney question the overall commercial viability and feasibility of these proposals as they appear to fall down on three levels.First, the commission that can be earned on simple Catmarked […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com