The continuing exodus at Dresdner RCM Global Investors has seen the firm
struck off some IFAs' buy-lists.
After losing head of global equities Bill Stack last summer, it proceeded
to lose all five major names on its UK equities desk, culminating in the
departure of star mid-cap manager Derek Lygo last week.
For the IFA community, alarm bells started ringing last September when UK
growth manager Justin Seager quit Dresdner for Jupiter. While IFAs were
disappointed that Seager was leaving, his assertions that the atmosphere
within Dresdner was stifling was the biggest worry.
By the time Seager left, small-cap manager Andrew Impey and head of UK
equities Stuart Fowler were already gone but the question was whether
Dresdner would be able to hang on to top managers such as Lygo and income
manager Paul Sheehan.
Despite Dresdner's protestations that there would be no more departures,
both were gone within a year.
Dresdner is the first house to have haemorrhaged managers on such a heavy
scale since Scottish Widows moved Hill Samuel to Edinburgh last summer.
But the story at Dresdner is much more intriguing, with few people in the
industry able to put their finger on the problem.
Hargreaves Lansdown inv-estment manager Ben Yearsley believes that part of
the problem is a lack of self-promotion as well as poor broker support.
He says: “The problem is that they will not put anything into marketing or
promoting the company. There is no incentive to buy the funds and now they
have basically lost the whole UK desk in a year. We had most of those funds
on our buy-list and now the only one left is the UK mid-cap. And we are not
sure what to do with that – it will depend on who they get to take over.”
While Hargreaves has kept the mid-cap fund on its buy-list in the past
year, other IFAs decided several months ago that they did not like what was
happening at Dresdner.
Bates Investment head of research James Dalby says he removed all Dresdner
funds from his firm's buy-list in May this year after Sheehan left for
Those that got out early were wise. After taking over the management of
the UK growth fund when Seager left in September, Derek Lygo's performance
began to plummet across the board. By the time Sheehan left in May, Bates
finally took the decision that things were not right and removed Dresdner
funds from its buy-list altogether.
Dalby believes that Lygo's poor performance over the past year could be
down to a number of reasons.
He says: “It could be the style, it could be morale dropping and it could
be some sort of top-level interference with the investment process. It is
going to be down to at least one or two of these things.
“At group level, I think there has probably been a lot of meddling in the
asset management level. If you look at Jupiter, which is also owned by a
German bank, they do not have that problem. I wonder if that would be
different if Jupiter was running under the Commerzbank brand like Dresdner
runs under its parents brand.”
Dresdner's side of the story is that although it has been unfortunate to
lose several managers over the past year, things are already changing for
the better. Earlier this month, it recruited Lucy Macdonald from Barings as
head of global equities and its search for a UK growth manager is well
Head of UK equities Neil Dwane says there is no need to panic. He says: “I
have quite a talented team around me – we just have not got quite as many
people in the light like Derek was.”
Dwane suggests that the reason for Lygo's departure may be that he was
disappointed to have not been given the role of head of UK equities when
Stuart Fowler left last summer. In his new job, Lygo will head the UK
equities desk at First State Investments. Explaining the departures of the
other four managers is not as easy.
The troubles of the past year have damaged Dresdner's credibility in the
eyes of most IFAs and portfolio managers. The more optimistic believe it is
unwise to be too quick to write the firm off. Certainly, with the backing
of a parent the size of Dresdner Kleinwort Benson, its pockets are deep
enough to buy a strong UK team.
Credit Suisse Asset Management director Robert Burdett, who runs CSAM's
multi-manager service, says the restructure that Dresdner will have to
undergo could turn out to be more positive than negative.
He says: “We are interested in looking at situations where there is
change. We are in a luxury position of building new portfolios from
scratch, so it was unlikely we were going to invest in Dresdner funds from
day one at the moment. But once things come clear, I think we may be
interested in looking at how it changes.”
The IFA community may need some convincing to jump back into Dresdner's
funds. However, with Lygo staying until October, the company has the time
to ensure it hires a top-class mid-cap manager to take his place.
But if its choice fails to impress, it risks seeing its final UK fund
removed from IFAs' buy-lists, leaving it in a precarious position in the
increasingly competitive UK retail market.