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Gartmore’s troubles continue, may lose mandate

Tuesday, September 07, 2010
Opalesque Industry Update – Problems at London-based asset manager Gartmore continue to pile up. Its lead portfolio manager has left and the firm risks losing a mandate to run one of its own investment trusts, reported Financial News yesterday.

In a regulatory filing before the London Stock Exchange (LSE), the board of directors of the listed fund Gartmore Growth Opportunities said it served a “protective” notice of termination (of 12 months) of its investment management deal with Gartmore.

Gartmore now has 12 months to find a replacement for the 17-year veteran Gervais Williams, who resigned last week. Williams, who has been managing hedge funds, smaller companies funds and Irish funds at Gartmore, is the second high-profile manager to leave since the firm listed on the LSE late last year. The first one was Guillaume Rambourg.

The notice added that Gartmore’s board of directors must be satisfied with Williams’ replacement or they would allocate the $84.5m (£55m) Gartmore Growth mandate to another asset manager.

Financial News said a spokesman for Gartmore declined to comment on the issue.

The notice also means the board will reduce its potential costs should it choose to not stay with Gartmore, according to Fund Strategy, which added that Adam McConkey had replaced Gervais Williams as head of UK smaller companies.

However, the board said it is still considering the trust management arrangements and may withdraw the protective notice, said Investment Week.

Williams is set to formally leave Gartmore at the end of this month where he has been heading the UK smaller companies and running the $129.13m (£84m) Fledging and $72.25m (£47m) Irish trusts, the $230.63m (£150m) UK & Irish Smaller Companies Oeic, as well as the Growth Opportunities trust.

He is being credited for the rise in Growth Opportunities assets after the trust outperformed the AIC UK Smaller Companies sector and the FTSE Small Cap ex IT index over five years.

The Gartmore Irish Growth and Fledgling investment trusts have not yet issued any statement on how they plan to move forward with their relationship with Gartmore, said Fund Strategy.

Gartmore’s woes
Gartmore’s problems began early this year when its star portfolio manager Guillaume Rambourg was suspended and then reinstated. Indeed, an internal probe found that he had violated internal trading rules when he directed trades to specific brokers. The UK Financial Services Authority (FSA) announced in June that it was formally investigating Rambourg in connection with the firm’s internal investigation.

Rambourg was then forced to resign in July. He said he was leaving the firm after 14 years to face the financial watchdog’s probe on his internal conduct as portfolio manager.

News of Rambourg’s resignation saw Gartmore’s shares plunge by 8% to 101p on July 15.

A day after his resignation, Rambourg took an $11.54m (£7.5m) paper loss from Gartmore but remained a shareholder of the company. He has a 3.9% stake in the firm.

In August, Gartmore reported a 65% decline in its profits after net outflows in the three months through June. Net income dropped to $29m (£18.8m) in the first six months of 2010 from $82.9mm (£53.9m) a year earlier. The company attributes the drop to the suspension and eventual resignation of Rambourg.

During the same period, Gartmore disclosed that its AuM fell by 15% as investors pulled cash and poor performance. The firm’s current AuM stands at $488.96m (£382m).
- Precy Dumlao

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