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All disquiet on the Hill Samuel front

As Hill Samuel&#39s star fund managers jump ship, thecredibility of the

company is being undermined.

Despite an insistence from headquarters that at least 20 or 30 fund

managers will make the move from Lon-don to Edinburgh in next month&#39s

merger with Scot-tish Widows, insiders have hinted that there may be no

more than 10.

But Scottish Widows head of corporate communications Alan Young believes

there is no cause for alarm.

He says: “Relocating to Edinburgh was a bold decision but, with funds

under management of around £90bn, the combined operation will be a bold

firm.

“There is a very positive indication that there will be a good mix of fund

managers from Scottish Widows Investment Management and Hill Samuel Asset

Management in the new business and we are confident that we have a team of

successful and experienced people.

“The key in not havingrelatively famous people in your team is

performance. Our new team are under no illusion that high performance will

be expected from them and we are confident that they will achieve that.”

The merger of Scottish and English houses is by no means unprecedented but

previous examples have chosen to continue running operations both North and

South of the border.

When Friends Provident bought Ivory & Sime three years ago, the newly

created Friends Ivory & Sime continued to be managed from both London and

Edinburgh.

FI&S marketing director John Yule says: “After Friends Provident merged

with Ivory & Sime, we decided to keep the two businesses running side by

side.

“We have very strong investment management performance and we were quite

happy with our fund managers. There was no need to relocate people.

“There is always fallout in this sort of situation but, given time, I am

sure Scottish Widows will find the right sort of people to replace the

members of their team who are leaving.”

The merger and proposed relocation of HSAM and Swim was announced in

March, nine months after Lloyds TSB&#39s £7.1bn acquisition of Scottish

Widows.

Although departures were expected, last week&#39s exitof the entire US team

toAberdeen has revived industry speculation that thereis more afoot at HSAM

than a simple reluctance to move to Scotland&#39s capital city.

Plan Invest director Michael Owen says: “I do not really know where Hill

Samuel are going at the moment but I don&#39t like what is happening – it

looks very ominous.

“When one fund manager leaves, that&#39s one thing but when whole teams start

to go, there has to be something wrong. We would not touch them at the

moment. Unless I can be convinced dramatically that the company has a

future, I will be selling.

“Until Lloyds TSB got involved, Hill Samuel had a relatively good name but

since then something has not been sitting comfortably. I think maybe it was

a question of autonomy.

“Fund managers at Hill Samuel were worried that they would play second

fiddle to Scottish Widows. I get the feeling that whether they moved to

Edinburgh or not, there was always something wrong about this deal.”

Owen&#39s fears are shared by IFAs across the industry. Ian Millward from

Chase de Vere believes the Edinburgh move has simply been the last straw

for an already disenchanted staff.

He says: “I think people will generally accept relocation if the package

is right, so I think it must run deeper than that. Hill Samuel has not been

known as a very strong company in recent years and I certainly do not have

any faith in them at the moment.”

Despite the negative reaction from IFAs, Hill Samuel&#39s competitors remain

reasonably confident that this will be a crisis from which it can recover.

The merger will make the new company Scotland&#39s biggest fund manager, and

among the top 10 in the UK.

Scudder Threadneedle com- munications director Richard Eats says: “It is

always true in financial services that integrating businesses has to be

done carefully. But the normal IFA reaction would tend not to involve

wholesale immediate switching and the company would normally be given the

benefit of the doubt.

“Having said that, IFAs would probably not invest in the company until

they could see the way ahead under the new operation.”

It is perhaps too early to write off Hill Samuel.

The last few weeks have seen attempts to seek positive press coverage with

stories that fund managers are slowly coming round to the move.

But with speculation that the European desk is on the verge of following

in the footsteps of Katherine Garrett-Cox&#39s US team, it would seem that

things could yet get worse for Hill Samuel before they get better.

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