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Star fund managers name their price

The resignations of George Luckraft and Nigel Thomas from ABN Amro to join Framlington has once again thrown star fund manager moves into the spotlight.

After a first quarter of relative inertia, the dual resignation of the star managers has highlighted how much of a shot in the arm – or shot in the head – it potentially can be for highly regarded “names” to switch companies.

The signing of Thomas and Luckraft is clearly a coup for Framlington and ABN Amro has been left facing an exodus of investors keen to follow the star players.

Hargreaves Lansdown head of research Mark Dampier says: “If you think of ABN Amro, you think of George and Nigel. Once you take that away, what is left?A lot of investors will have bought the fund because of these guys so I expect a huge flow of that money to just go with them. ABN must be in turmoil.”

In fact, with Thomas and Luckraft currently managing £1.3bn of ABN Amro&#39s £1.5bn under management, Dampier believes it may just cut its losses and pull out of the UK retail market altogether.

Whether it does may depend on it finding suitable replacements within the 12 months it has before the contracts of Luckraft and Thomas expire.

ABN communications director Nick Wells says the firm is confident of finding “pedigree” managers to fill their shoes but Dampier believes this could prove to be an uphill task to say the least as he believes the issue is not so much that there is a dearth of talent but whether the talent can be wooed from their existing employers.

However, Framlington was not top of anyone&#39s list to poach either Thomas or Luckraft so, ironically, it proved it can be done. But there is a question mark over what spurred their surprise departure. Already wealthy men, is a formidable financial package the sole motivation?

A senior industry source says: “It was rumoured that ABN Amro was looking for some kind of acquisition – not just a straight cash deal – that would have changed the working conditions for the fund managers in a way they were not happy with. It may well have influenced their decision.”

Regardless of whether this was the case – and many agree that there looks to be more to it than money – Framlington has still pulled off a major coup, managing to assemble a team bristling with talent.

With well-respected managers such as Chris Murphy and Roger Whiteoak already in situ, Framlington says it has the strongest UK equity team bar none.

Framlington chief executive Mike Vogel says: “We have already developed a reputation as a leading manager of specialist funds. Now we intend to establish the same reputation in core funds. The addition of George and Nigel takes us nearer that goal.”

Many IFAs agree with this assessment but point out that, while signing big names is good for the prestige of a fund manager, it is not always a guarantee of success.

Simpsons partner Andrew Merricks says: “Framlington is now certainly on the short list for the best UK equity team. It has regrouped from its knockbacks and all credit to them. But I wonder what drives some of these guys. Do they have the motivation to go on and achieve so much all over again? On paper it looks great but history is littered with faded stars.”

Merricks may question the desire of the Thomas and Luckraft but he is in no doubt what impact their departure will have on ABN Amro. Even if, as he believes, Framlington offered “football transfer” money to acquire their services, Merricks says the moves go to show the dangers for big firms of relying on the success and loyalty of key individuals.

Almost as soon as their departure was known, a host of IFAs put the four funds the two managers run – Thomas manages the ABN Amro UK select opportunities and UK growth funds and Luckraft manages the equity income and high-income funds – on hold.

Hargreaves and Chelsea Financial are among those saying they will not consider changing this situation until their replacements are announced.

It may well prove to be a major test of ABN Amro&#39s desire to stay in the UK retail market. While it looks for new recruits who command similar respect to their predecessors, it will clearly struggle to pull in any new business. But it claims not to be worried about the dedication of the two managers during the time they serve out their contracts.

Wells says: “They were great guys and it is a setback. But we will be holding them to their contracts and, as professionals, it is in their interests to perform.”

Even so, if comparable quality replacements can not be found, ABN runs a great risk of losing most of the investors who bought the funds on the back of Thomas and Luckraft.

But as IFAs and fund managers attest, for the right price, just about anyone is available. The question is whether ABN Amro has the stomach to agree to the kinds of demands likely to be asked of it by potential targets – the kind that mid-sized firms such as Framlington are now prepared to meet.


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