A merger between UBS and SBC, reportedly close, unquestionably would create the world's largest money manager. But the question is: Who would run the show?

Some bets are on Swiss Bank Corp.'s SBC Brinson to dominate a combined institutional operation, which would have nearly $300 billion under management. If a merger occurs, the whole investment management operation would have more than $850 billion under management.

For one thing, when Gary P. Brinson negotiated the $750 million sale of Brinson Partners Inc., Chicago, to SBC in September 1994, SBC gave Brinson Partners exclusive control over the bank's institutional money management business. Mr. Brinson is chief investment officer and chief executive of Brinson Partners, and is CIO of SBC Brinson.

If the bank were to breach the exclusivity agreement, Mr. Brinson and his team could walk, sources said. In addition, Mr. Brinson has a powerful ally in Marcel Ospel, chief executive of SBC.

But don't count out UBS Asset Management, which includes Britain's second-largest pension manager, PDFM Ltd., London.

PDFM is a bigger presence in the United Kingdom than Brinson is in the United States. And, Union Bank of Switzerland is larger than SBC.

So far, officials at the banks and the respective money management units declined to comment about rumors of an outright merger or an alliance involving different aspects of their businesses. But one source said talks are under way and an announcement might be made as soon as Dec. 8.

Brinson Partners has $90 billion in institutional assets and $53 billion in Swiss mutual fund assets under management.

Basel-based SBC had an estimated 500 billion Swiss francs ($350 billion) under management, including Brinson's assets.

As of Sept. 30, Zurich-based UBS had 730 billion Swiss francs ($511 billion) under management. Of that, 290 billion Swiss francs is in institutional assets, including assets run by PDFM.

A combination of the two would create a manager with sizable presence in the Swiss, U.S. and U.K. markets.

About two-thirds of Brinson's institutional assets stem from U.S. clients; more than 90% of PDFM's L64.6 billion ($108.5 billion) came from U.K. pension clients.

Meanwhile, UBS had $53.3 billion in assets under management for Swiss pension funds as of June 30, 1996, while SBC Brinson -- Brinson's moniker outside the United States) managed $12 billion in Swiss pension assets at year-end 1996.

As for Mr. Brinson's chances of leading the merged investment management operation, observers say he and his top managers are more politically savvy than PDFM's leadership, headed by Chairman Paul Meredith.

"The Brinson guys can probably out-Machiavelli Machiavelli," said one consultant, who asked to be unnamed.

What's more, Mr. Brinson might have the better ally. His firm was acquired under the direction of Mr. Ospel, then in charge of SBC's investment banking division. Mr. Ospel, who has brought an aggressive style of management to the bank, is not expected to take the second seat in any merger.

In fact, a merger could create a graceful exit for UBS Chairman Robert Studer, whose tenure has been marked by attacks by Swiss corporate raider Martin Ebner and poor public handling over Nazi gold accepted by the bank during World War II.

In addition, Mr. Brinson serves on SBC's executive board, giving him increased leverage there.

Mr. Brinson has worked to organize SBC's disparate money management units around the world into one cohesive operation (Pensions & Investments, March 17). However, some U.K. pension experts would be shocked if a merger threatened PDFM's valued franchise among U.K. pension funds.

"It would surprise me greatly if anything would happen to the way PDFM" manages money, said Nick Fitzpatrick, head of Bacon & Woodrow's investment consulting practice. "We're not expecting that this is going to result in a change in PDFM. If that happens, it is likely to upset their client base."

Despite sometimes sharp criticism over the firm's recent performance, PDFM has managed to hold onto the bulk of its clients.

PDFM has won plaudits from consultants and clients for sticking to its value-oriented investment approach, even in a market that has marginal appreciation for the benefits of style investing.

The manager's higher-than-average cash levels over the past 21/2 years -- now around 13% to 14% for institutional balanced clients -- have been attacked publicly.

In addition, performance in the first half of 1997 was dampened by a U.K. equity market where 40% of outperformance came from four stocks, and large-capitalization growth stocks were favored, explained Wilson Philips, senior vice president.

Market volatility during the past two months has helped PDFM greatly, and the firm's performance is in line with the industry median for the first 11 months of this year, he said.

Another consultant suggested PDFM's bottom-up approach would sell better to continental European pension funds than Brinson's top-down-driven model, although the Brinson name would carry more weight.

In comparison, Brinson Partner's non-U.S. bond portfolio in the Pensions & Investments Performance Evaluation Report topped the Salomon Brothers Non-U.S. World Government Bond Index for the three years ended Sept. 30, and its U.S. equity portfolio topped the S&P 500 Stock Index. Its non-U.S. equity portfolio, however, lagged the MSCI World Index. And its global tactical asset allocation portfolio reportedly has lagged its benchmarks.

Union Bank of Switzerland has a separate operation in Zurich, almost entirely for Swiss pension funds. It had $53.3 billion in assets under management, as of June 30, 1996, according to William M. Mercer's European Pension Fund Managers Guide.

The bank's U.S. operation, UBS Asset Management (N.Y.) Inc., New York, which had $33.6 billion at year-end 1996, has had a rocky time of late. Acquired from Chase Manhattan Corp. in 1991, the unit had $9 billion of its $22 billion tax-exempt assets under management invested in bonds in May. But the defection of five fixed-income managers to Refco Group Ltd. last April has spurred the loss of an $825 million corporate bond portfolio from the $20 billion Los Angeles County Employees' Retirement Association.