FRANKFURT -- Dresdner Bank AG's Leonhard Fischer is the apparent victor in a power struggle over control of the more than $600 billion money management machine created by the merger of Dresdner and Deutsche Bank AG.
The abrupt resignation last week of Michael Dobson, Deutsche's London-based head of asset management and one of the heirs apparent to lead the combined asset management business, pointed to an internal power struggle during the past few weeks, money management sources said.
Investment professionals at Dresdner Bank had expected the top position to be shared by Mr. Fischer, head of asset management at the bank, and Mr. Dobson.
Mr. Fischer's position in the asset management business, which will manage roughly E685 billion euros ($665 billion) for institutions, has not been confirmed officially. An announcement is expected within the next five weeks, said a Deutsche spokesman.
Sir Robert Smith, vice chairman of Deutsche's asset management division, has taken over from Mr. Dobson as chief executive of Deutsche Asset Management.
Despite the intense press attention paid to the banking aspects of the merger of the Frankfurt-based banks, some insiders said the real goal of the marriage is to build a huge, first-rate global money management operation.
But another a source very close to Dresdner disagreed, maintaining it was very clear that the deal was struck primarily to rationalize both banks' retail operations in Germany and to consolidate investment banking. The source, who insisted on anonymity, said asset management was an afterthought of the two boards.
It also was apparent as long as several weeks ago that Mr. Fischer was considered the best person on the Dresdner board and was the strongest candidate to head up global asset management. The source thought that Mr. Dobson has spent the last several weeks making up his mind about whether he wanted to share responsibility for global asset management with Mr. Fischer.
As Pensions & Investments went to press, no details on the integration of the asset management business were available. According to data provided to P&I, Dresdner RCM Global Investors, San Francisco, managed $82.7 billion worldwide as of Dec. 31, $70.7 billion of which was for institutional investors worldwide and $36.6 billion of which was for U.S. institutional tax-exempt clients.
Deutsche Asset Management ran $680 billion worldwide as of Nov. 30, $214 billion of which was for U.S institutional tax-exempt investors.
It is clear, said observers, that Mr. Fischer and senior executives in the asset management divisions of both banks will be scouring each other's asset management operations over the next few months to see where the two overlap.
Integrated or separate?
Some sources noted Deutsche and Dresdner each integrated previous money management acquisitions into a single unit.
But one observer, who is close to the situation and did not want to be identified, disagreed with this characterization of Deutsche. With the need to absorb so many mergers -- most notably Morgan Grenfell and Bankers Trust -- the Deutsche global money management model has evolved toward a loose confederation of money managers, with increasingly centralized marketing to explain the disparate parts to clients worldwide, the observer said.
"Deutsche is sitting on a global network that is duct-taped together. They're trying to cobble it all together, and now are adding one more thing to the mix, which is really just another piece of duct tape on top of all the rest. They've been giving off a fairly consistent impression of not knowing what's going on," said the observer.
"I think with Dresdner, short-term, Deutsche will leave the money management operations independent and centralize marketing. Later, two or three years down the line, they will have a look at overlaps and see where they can integrate some operations," the observer added.
Heading for the exits
But some employees haven't waited to see which camp of public opinion prevails.
Key executives in the asset management operations of both companies have been heading for the exits in the past few weeks. Besides Mr. Dobson, senior departed staffers are:
* Heinz-Ludwig Drayss, Deutsche Asset Management's chief investment officer, stepped down in mid-March and is to leave the company, said a Deutsche bank spokesman. Mr. Drayss has been replaced by Christoph Bernard.
* Richard Marin, co-head of asset management at New York-based Deutsche Asset Management and a 20-year veteran of Bankers Trust, is leaving the post to pursue electronic commerce. Mr. Marin will develop a web strategy for Deutsche Asset as a consultant, while setting up his own electronic commerce consulting firm. Joshua Weinreich is now sole head of asset management in North America at Deutsche.
* Rolf Passouw, the head of the management boards of Dresdner's German mutual funds operation, Deutsche Investment Trust GmbH, and its institutional asset management business, Dresdnerbank Investment Management KAG, is retiring at the end of this month. He will be replaced by Michael Korn, global head of institutional business for Dresdner Asset Management. Heinrich Linz, global head of mutual funds business, will replace Mr. Passouw at DIT.
* Ralf Bentheim, managing director of fund management for Dresdner's mutual fund business, quit last month over "differences in views on company policies," said a Dresdner Bank spokesman.
Other staff at both companies are taking some comfort from a statement by Rolf Breuer, chief executive at Deutsche Bank, that the asset management division of the combined bank would be excluded from "restructuring measures to remove duplications," said Andreas Gossmann, chief executive officer of Dresdner RCM Global Investors (UK) Ltd., London.
But outsiders say it is not at all clear which platform for investment management will prevail.
"It's an exciting deal, as it will create a sizable firm that will have a material impact on the market in North America and elsewhere. But how they will organize the integration to keep resources intact, to keep people in place and happy, that's the real challenge," said Robert Hudon, executive vice president and director of the investment management consulting group at Capital Resource Advisors Inc., Chicago.
"Deutsche is still digesting Morgan Grenfell and Bankers Trust, and Dresdner is still digesting RCM and Kleinwort Benson. You have in this deal at least five really big money management firms that they have to try to bring together," Mr. Hudon noted.
A highly placed Dresdner RCM source said consultants worldwide acknowledge that Dresdner's global investment management platform is a "better model, because it is truly global with shared research and shared philosophy. The critical measure is performance, which is excellent across all of our products. We've proven that the model is really working, even through an integration of several new companies."
German units to get hit
Consultants think it likely that the German asset management operations will bear the brunt of the merger's damage.
Each bank's German institutional business is very similar and the product ranges largely indistinguishable, said consultants. But even if the Dresdner name were to disappear, Dresdner's clients likely would remain with the merged bank as the operations are seen to be similar, said Christa Sch"ning, managing director of Metzler Asset Management GmbH, Frankfurt. Outside Germany, consultants said, the product lines of the two banks are complementary. In so far as they are familiar with each other's investment capabilities, insiders at Deutsche and Dresdner agreed that beyond German borders, the operations of their companies dovetail well.
The Dresdner-Deutsche merger will become effective retroactively from June 1, 2000, after approval by shareholders of both companies at meetings to be held in November. If all goes according to plan, the combined bank will be called Deutsche Bank AG.