EDINBURGH - Edinburgh Fund Managers pulled out of North America and is focusing solely on its U.K. institutional business following declining profits and heavy pressure from shareholders.
Last month, the firm pulled the plug on its North American operation, closing its Toronto and Atlanta offices and moving client servicing to the Edinburgh head office. The group now will focus on building its L1.1 billion ($1.73 billion) U.K. institutional business and developing its multimanager operation for smaller pension plans, said Ian Whittingham, group business development director.
The firm was rocked late last month when Chief Executive Officer Iain Watt and four non-executive directors resigned under pressure from key shareholders, including Hermes Pensions Management Ltd., London, and Prudential M&G, London.
Chief Investment Officer Anne Richards and Chief Operating Officer Rod MacRae were appointed joint managing directors, taking Mr. Watt's duties.
At the same time, Carole Haddow, global head of institutional business, left the firm. But she left of her own accord for personal reasons, said Mr. Whittingham. Ian Panton, former U.K. client director, assumed Ms. Haddow's post. Ms. Haddow could not be reached for comment.
Ms. Richards, Mr. MacRae and other senior executives are hammering out the future direction of the firm. The boardroom change has triggered rumors that part of the business may be up for sale. But selling the institutional fund management business was not being discussed, said Mr. Whittingham.
More than 50% of the company's shareholders had concerns about the firm's leadership, so the departure of Mr. Watt and the other board changes had been "unfortunate but cathartic," said Mr. Whittingham.
Tony Watson, chief executive at Hermes, resigned from Edinburgh's board of directors in August after a disagreement over the strategic direction of the company. He would not comment on the recent management changes.
Welcomed the change
Consultants said it was high time the firm focused its operations. They welcomed the change in management, saying the firm had needed a strategic review since acquisition talks with Hermes collapsed earlier this year.
Edinburgh has been struggling to win new U.K. business since the departure of Chief Investment Officer Mike Balfour in October 2001 and news that the firm was in merger talks with shareholder Hermes.
The Hermes talks collapsed in February, and it took until September for Mr. Watt to appoint Ms. Richards as CIO. Ms. Richards, former senior fund manager at Merrill Lynch Investment Managers, London, is respected by local consultants and is seen to have the backing of EFM's shareholders.
In July, the firm suffered a major blow when it lost its biggest institutional client. Trustees of the L1.4 billion Edinburgh Investment Trust, Edinburgh, dropped the firm as their sole money manager and handed the job to Fidelity Investments, London.
Group revenue was hit hard by the loss of the mandate. Fee income was around L5 million a year, said Clare Gardner, joint head of manager research at U.K. consultant Hymans Robertson, Edinburgh.
Uncertainty
Adding to the firm's woes is uncertainty over the future of a L798 million balanced mandate managed for the Edinburgh-based Bank of Scotland's 1976 Pension Scheme. Trustees of the L1.4 billion pension plan are busy reviewing management of the mandate, said Bank of Scotland spokesman Mark Elliot.
EFM closed its North American operations to shore up its weak finances, analysts said. Earlier this year, Mr. Watt told analysts that closing the offices would generate savings in the region of L2 million.
One source close to EFM said the group had struggled to win new business in North America because of its poor performance in its U.S. equity and EAFE mandates. The firm, which currently has L160 million from two unidentified North American clients, was forced to drop L50 million in mandates when it exited North America.
"We are not denying we have a lot of hard work to do," said Mr. Whittingham. EFM needs a period of stability to entrench its investment process and maintain good relationships with clients and shareholders, he added.
