The fund manager Gartmore is facing a potentially catastrophic exodus of funds after it announced the departure of its star manager, Roger Guy, and hoisted a "for sale" sign above the business yesterday.
Skandia Investment Group immediately said it was terminating a €38m (£33m) mandate it had placed with Mr Guy, who ran 16 per cent of Gartmore's assets, "to protect our investors". Skandia added that "if necessary" it would "not hesitate" to remove up to £150m more that was assigned to Gartmore but not to Mr Guy.
The stockbroker Killik also put a "sell" on funds run by Mr Guy. Its head of research, Mick Gilligan, said Mr Guy's presence at the helm "is paramount in our view" for the type of hedge funds he has been running. Gartmore is likely to face similar difficulties with other important institutional clients.
The departure of a single senior fund manager like Mr Guy is usually enough for a fund manager to be put under review. But when it is combined with the corporate instability of a potential sale or merger, together with a cost-cutting programme, it means that Gartmore will face a struggle to reassure and retain other clients. The company's chief investment officer, Dominic Rossi, also said yesterday he was quitting to join rival Fidelity.
Gartmore said it had set aside shares equal to 15 per cent of the company to keep remaining staff on board as it works with Goldman Sachs to find a buyer – but the value of those shares are falling rapidly. Gartmore floated on the London Stock Exchange at 220p last December and the shares have been falling ever since. Yesterday they finished 18.9p lower at 107p.
The company has been rocked by a series of high-profile departures since coming to the market. Its troubles began in the spring when Guillaume Rambourg, who worked with Mr Guy on the company's flagship European Large Cap fund, was suspended in the wake of an internal inquiry and subsequent investigation into his conduct by the Financial Services Authority.
At the time, he and Mr Guy managed one third of the money placed with Gartmore. A few months after Mr Rambourg's departure, Gervais Williams, who ran Gartmore's Growth Opportunities Fund, followed him out.
Gartmore will at least be able to call on Mr Guy as a consultant until May. But he will cease day-to-day management of money at the end of the year when his operations are taken over by John Bennett, who will head an all-new European Equities team.
In a statement issued by Gartmore, Mr Guy said he would remain invested in the funds once he left. He is Gartmore's largest individual shareholder, with 5.4 per cent of the stock, although there are limits on when he can sell.
Jeff Meyer, the chief executive, said the decision to call in Goldman Sachs did not mean Gartmore was engaged in a fire-sale. "We don't have to sell. We are looking at options for a merger but we could easily carry on alone and build the business organically," he added.
"This announcement is front-loaded. It is designed to get all the news out there rather than have it drip out. Roger began a dialogue with me in September and we went through various options, including giving him more resources to get more time off to spend with his young family.
"It is a blow, but we did everything we could to keep him. I have worked with him for six years and respect him greatly."
Mr Meyer admitted he had "looked at his position" in the wake of Gartmore's difficulties but added: "When we did the initial public offering [of shares] in December, we were in the best shape for 10 years. We have been hit by factors outside of our control."
The 10 per cent cost-cutting plan will see smaller, non-core operations closed. Gartmore employs 350 people, but up to 70 could now lose their jobs. Mr Meyer will resume the role of chief investment officer for now.Reuse content