Gartmore has appointed Goldman Sachs to conduct an “assessment and evaluation of the strategic options for the Company”, which may include the possibility of a sale or merger, in tandem with the announcement that Roger Guy (pictured), head of the European Large Cap fund management team, is to retire from day-to-day fund management.
Also leaving Gartmore are Dominic Rossi, Chief Investment Officer, who is taking up a role with another asset manager, and Darrell O’Dea, senior portfolio manager.
Jeffrey Meyer, Chief Executive of Gartmore Group Limited, says: “2010 has been a difficult year for the Company. The Executive Management Team and the Board have a responsibility to ensure the Group’s current strategy of building independent, broadly-based, team-oriented portfolio management expertise is the optimal way to deliver value to shareholders in the future. The Board has therefore appointed Goldman Sachs to evaluate the strategic options available to the firm. These may include the possibility of a sale or merger. At the same time, we are implementing a targeted cost reduction programme and putting in place the necessary plans to further incentivise and retain our key staff.”
In parallel with the strategic review, Gartmore says it will implement measures to further strengthen the business and to support its strategy of building investment teams capable of taking advantage of growth potential in its key business areas. It is anticipated that the Board will update shareholders by no later than the announcement of the preliminary results in March 2011.
As part of these measures, Gartmore is conducting a firm-wide cost saving programme, which the Board expects to yield approximately £10 million in annual savings. New equity, representing up to 15% of the Company’s existing issued share capital, is also being made available under existing authorisations to retain and incentivise key employees.
Gartmore has put in place a process to ensure an orderly handover of Roger Guy’s responsibilities and will combine the European Large Cap and All-Cap teams into a single European Equities Team lead by John Bennett. Over the coming months Guy will continue to manage funds and is expected to work closely with the new European Equities Team and Gartmore clients to ensure the smooth transition of his responsibilities to John Bennett and the team. This transition will be fully implemented in the New Year. Guy will remain available to Gartmore on a consultancy basis until May 2011.
John Bennett, whose team is currently responsible for £3.1bn of AUM (as at 30 September 2010), has over twenty years’ experience of managing European equities and over ten years of managing long-short portfolios. His support team will now include European Large Cap investment analysts Leopold Arminjon and Tomas Pinto, as well as Moni Sternbach.
The European Large Cap team, currently led by Roger Guy, manages £3.5bn of AUM (as at 30 September 2010), comprising £1.3bn in alternative funds, £0.5bn in mutual funds and £1.7bn of segregated mandates. At 30 September 2010, the European Large Cap team accounted for £25.9m of annual net management fees for the Group, with £18.1m attributable to alternative funds, £4.9m to mutual funds and £2.9m from segregated mandates.
Gartmore is making no changes to the named portfolio managers responsible for its UK, Global, Emerging Markets, Japanese, Fixed Income, Financials, Fund of Funds and US (sub-advised) investment capabilities. In addition, there will be no material changes to the client facing distribution teams or the marketing budget that supports them.
Separately, Dominic Rossi, Chief Investment Officer, has decided to resign from Gartmore in order to take up a role at another asset manager. Pending the appointment of a successor to Rossi, Jeffrey Meyer, CEO, will resume CIO responsibilities, a position he held for three years until Dominic’s appointment in November 2008. In addition, Brian Mitchell, currently Head of Dealing, has been appointed Chief Operating Officer of the Investment Division.
Gartmore’s interims for the third quarter of the current financial year, being the 3 months ended 30 September 2010, show that AUM grew from £19.9bn at 30 June 2010 to £20.7bn at 30 September 2010, a 4% increase. Positive market movement and investment performance were partially offset by net outflows of £0.7bn. Estimated AUM at 31 October 2010 was £20.9bn, despite outflows of £0.3bn during October. The Group has been notified of a further £0.5bn of withdrawals. Net debt at 30 September was £79.7m comprising gross debt of £247.1m and cash of £167.4m. Seed investments at 30 September were £17.3m.
To ensure the retention and incentivisation of its investment management talent and of the executive team as well as to reinforce the alignment of interests between staff and shareholders, Gartmore is putting in place new equity grants. The majority will be awarded to key portfolio managers. These grants will utilise existing shares available for new grants and an issue of new equity of up to 15% of Gartmore;s existing issued share capital, which will be made under the authority already approved by shareholders, within the 15% limit available for such grants. These equity incentives will be similar to Gartmore’s existing grants and will carry three year vesting provisions.