EDINBURGH -- What a difference a year makes.
In August 1999, Scottish Widows Investment Management Ltd. was raking in new mandates in the United States, and its well-known European equity team had been appointed to manage assets for a number of large European institutions.
But by last month the firm's chief executive and chief investment officer, Orie Dudley, had resigned; many of those European equity mandates had been lost following the departure of the European equity team for rival BlackRock Inc.; and between mid-July and mid-August alone 1.4 billion ($2 billion) in U.K. institutional mandates went away.
Mr. Dudley now is packing his bags and riding kit -- he is a keen horseman -- to return to his native United States, where he will take the reins as chief investment officer at Northern Trust Global Investments, Chicago.
The renamed Scottish Widows Investment Partnership moved swiftly to appoint replacements for Mr. Dudley. Deputy CEO Bill Main has been appointed CEO, and Sandy Nairn has been made chief investment officer.
SWIP is in the process of building up both its European and U.K. equities teams, said Iain Reid, chief operating officer. It will continue to pitch for institutional business in fixed income and global equities, he added.
Institutional assets now comprise 25.1 billion of the firm's total 89.1 billion in assets under management, said Mr. Reid. In March, shortly before the two firms merged, institutional assets accounted for 3.6 billion of SWIM's 32.9 billion under management. At Hill Samuel, however, institutional assets were 21.7 billion of the firm's 55.6 billion in total assets under management.
But the upheaval and loss of key staff mean the firm is unlikely to find itself on consultants' manager selection shortlists for at least a year, according to investment consultants.
Part of the turmoil of the past year came as Lloyds TSB Group PLC, London, which bought Scottish Widows in July 1999, attempted to merge the Edinburgh firm with its London-based subsidiary, Hill Samuel Asset Management Ltd.
With hindsight, that merger attempt can only be described as botched, and there is considerable argument in the bars and restaurants of London and Edinburgh as to where the blame lies for the demise of Scottish Widows.
Mr. Dudley was CEO of Scottish Widows before the firm's purchase, having joined it in early 1998 from Barclays Asset Management in London, and retained that title post-merger.
A year ago, as Mr. Dudley was preparing to merge the two asset management operations, he told reporters he felt he had all of the investment teams in place for the combined firm, except for emerging markets.
But the firm suffered a body-blow in late December when Albert Morillo, the head of European equities, three managers from his investment team and Alan McKenzie, SWIM's head of institutional sales, defected to BlackRock. Mr. Dudley refused to comment at the time, but there is no doubt Mr. Morillo's departure severely undermined Scottish Widows' ability to win business. Mr. Morillo and his team had been responsible for pulling in considerable business for SWIM.
The merger looked increasingly unstable as investment talent started to flee Hill Samuel as well, despite Mr. Dudley's best efforts to persuade them to stay. Mr. Dudley began to spend an increasing amount of time in London toward the end of last year and in the first few months of 2000.
But in April, John Ainsworth, Hill Samuel's chief investment officer, Peter Baxter, head of strategy, and Fiona Hathorn, head of Far East and Global Emerging Markets, left to join Old Mutual PLC in London. David Kiddie, European equities expert, moved to Rothschild Asset Management, and Katherine Garrett Cox, who was in charge of U.S. equities, quit to join Aberdeen Asset Management, both in London.
Lloyds TSB's decision to make Edinburgh the center of the asset management operation was an important factor in the loss of the Hill Samuel staff.
By July, Mr. Dudley was sending out strong signals that he was unhappy with the progress of the merger and was concerned about the prospects of the asset management group.
He expressed publicly his frustrations with his parent company during a presentation at a fund management conference in France, where he questioned Lloyds TSB's long-term commitment to the asset management business. Mr. Dudley subsequently claimed he was quoted out of context. But his outburst triggered a public slap on the wrist from Lloyds TSB Deputy Chief Executive Mike Ross, who said the bank was totally committed to SWIP.
Whether Mr. Dudley was publicly echoing earlier discussions with Mr. Ross or simply putting out feelers in the job market is unclear. But by late July, Mr. Dudley had begun talking to Mr. Ross about "other job opportunities," said Mr. Reid.
It was unclear exactly when Northern Trust first approached Mr. Dudley, but a source who asked not to be named said Mr. Dudley told senior executives at Lloyds of his negotiations with Northern Trust by early August.
The fact that SWIP had mapped out Mr. Dudley's successors before he publicly announced his departure indicated the announcement had been planned for some time. Coincidentally, the announcement was made the week Scottish Widows' 1.6 million policy holders were due to receive windfalls totaling 5.8 billion following Lloyds TSB's acquisition of the firm.
Seeking global role
Former colleagues and executives at rival money managers greeted Mr. Dudley's departure with both admiration and surprise.
His ambitions to run a large money manager with a global presence are well-known. In part he already had achieved that; by the time he resigned, SWIP had 90 billion under management. But the firm was lacking in the global reach he wanted.
Northern Trust might be the perfect vehicle for his ambitions.
But his new bosses might want to tread carefully. Mr. Dudley's outspokenness is well-known, and former colleagues described him as having an iconoclastic attitude toward his bosses. He also is known for a somewhat mercurial management style.
But Donald Brydon, his former boss at BZW Investment Management, said he enjoyed Mr. Dudley's outspokenness, and hired him to head up BZWIM's European retail business in the mid-1990s.
Mr. Dudley first caught Mr. Brydon's attention while working at a BZWIM Canadian subsidiary, "where he was honest and skillful in appraising the business and organizing its sale," Mr. Brydon said. By doing so, Mr. Dudley effectively managed himself out of a job, but he was subsequently rewarded with a position at BZWIM in London.
Mr. Dudley likely will be missed in the relatively dour world of asset management in Edinburgh. As an outspoken man from Idaho, Mr. Dudley certainly provided some color in the city's more conservative banking circles.
It may well suit Mr. Dudley's personal life to move back to the United States. His commitments at Scottish Widows meant he was not able to get to his ranch in Boise, Idaho, as often as he wanted. Former colleagues described the ranch as a life force for Mr. Dudley and said he would return from his regular trips there physically and mentally refreshed.
Ironically, he is being forced to sell the Boise ranch because of pressure from the Environmental Protection Agency, which is concerned about the possibility of the ranch polluting a nearby river. Once based in Chicago, Mr. Dudley said he will look for a ranch in Kentucky.
