EDINBURGH, Scotland - Scottish Widows Investment Management Ltd. was dealt a major body blow when almost all of its European equity team left for the Edinburgh office of BlackRock Inc.
BlackRock International Ltd., the company's European division, got a big shot in the arm with the team liftout, adding an important growth style component to its value-oriented European equities team.
The former Scottish Widows team, led by Albert Morillo, head of the U.K./European equity desk, had been instrumental in attracting new business, consultants said. Other team members joining BlackRock are David Stanistreet and Kenneth Anderson, European desk investment directors desk directors; Allan McKenzie, head of institutional sales; and client relationship manager Richard Alexander.
The European equities team brought in $1.4 billion to Scottish Widows in just the first six months of 1999, Mr. McKenzie said.
The departures could hurt Scottish Widows' marketing efforts in Europe and the United States. SWIM has L35.5 billion ($57.1 billion) in assets under management, 18% of which is institutional business.
"SWIM had a jewel in its crown and that was Morillo. The European team had excellent stock-picking skills. This development is bad news," said Michael O'Brien, a consultant at Towers Perrin, London.
Few observers are willing to place bets on Scottish Widows keeping much of the money Mr. Morillo's team brought in. They said the merger of Scottish Widows with Hill Samuel Asset Management, London - the result of the expected acquisition of Scottish Widows by Lloyds TSB Group - was one of the main reasons for the departure of Mr. Morillo and his team.
When the merger was announced, Orie Dudley, Scottish Widows' chief executive officer, wrote letters to clients, reassuring them there would be no changes to the European equity team, which had $4 billion under management in late June.
Following the team's departure, Fiona McRae, a member of the European equity team, was named to replace Mr. Morillo. Mark Richardson, an investment director from the U.K. equities team, and Kathleen Dewandeleer, a money manager on the European emerging markets team, will assist Ms. McRae and investment director Francoise Watson.
Scottish Widows spokesman Alan Young said Ms. McRae and Ms. Watson had been working with Mr. Morillo since the European equity team first formed almost 10 years ago.
Many Scottish Widows clients said they were keeping a close eye on the European equity mandates they had given the group.
Nina Moven, head of asset allocation at Pensionskasserne Administration, Hellerup, Denmark, said she was not happy about the departures. But she plans to wait and see how the plan's E100 million ($100 million) Euroland equity mandate is managed by the new team before deciding whether to review the contract.
Mark Ashby, pension finance manager of the L3.7 billion Civil Aviation Authority Pension Scheme, London, said he was aware of the situation and was considering what to do.
"Quite clearly this is a high priority for us at the moment," he said.
While the defections could hurt Scottish Widows' marketing efforts, they are expected to help BlackRock's.
CEO Laurence D. Fink said he especially coveted Mr. Morillo's long track record and more aggressive, growth-oriented, cap-weighted investment style.
BlackRock's liftout fits perfectly with Mr. Fink's preference for adding teams of managers, rather than acquiring companies.
"If we did an acquisition, we would have to swallow it whole. We want one BlackRock name, one profile, one platform. It's much easier to bring in teams (than whole companies)," he said.
"We saw a great opportunity to help us lift our EAFE product, because we were already perceived as being strong in Pacific Basin (equities), especially Japan. This helps us expand into Europe. I am very bullish right now on European products and we will expand aggressively into Europe," Mr. Fink said.
He said BlackRock International will expand from its Edinburgh base and add a London marketing office and possibly one in Amsterdam.
BlackRock has $150 billion total in assets under management, $125 billion of which is institutional.
Mr. Fink is confident a more aggressive marketing program and the addition of stronger European stock management capabilities will help BlackRock, which is known primarily as a fixed-income manager.
BlackRock International now manages about $2.5 billion in commingled equities in Edinburgh, said Gordon Anderson, managing director at BlackRock International. It has yet to win any separate account business from European institutional investors.
In the United States, BlackRock topped $150 billion under management in its first 11 years.
