FEARS are growing that Abbey National will outsource management of its (pounds) 28bn of funds to US giant State Street, thereby axing its investment division in Glasgow and dealing a devast-atingblow to the city’s financ-ial sector ambitions.
A tip-off that Abbey was poised to unveil a deal with State Street on January 22 was viewed as highly credible by industry observers, with one very senior fund management executive describing this as a “strong possibility”. Abbey refused to calm the worries.
Such a move, were it made, would very likely mean the vast bulk of the 50 fund managers at Abbey National Asset Managers in Glasgow would lose their jobs. The future of 60 back office staff would also be in doubt.
It would almost certainly result in ANAM’s (pounds) 28bn of funds being transferred to London, at a time when Glasgow is trying desperately to build an international financial services district. ANAM’s funds account for the bulk of those managed in Glasgow. State Street conducts its fund management activities in the UK from London.
It remains to be seen whether or where State Street would carry out the associated investment administration in any outsourcing deal with Abbey, although it has a big presence in this area in Edinburgh, where it owns WM Company.
Referring to ANAM, a source told The Herald: “Yes there is something in the offing, yes staff morale is at an all-time low, and yes it will be announced on January 22. But it’s not for sale and the deal has already been done. All equity and bond management will be outsourced to State Street with immediate effect.”
There was, however, no confirmation yesterday from either Abbey or State Street, which has not been linked before with ANAM, that this was the chosen route. Sources say staff at ANAM have been unable to get any information about Abbey National chief executive Luqman Arnold’s plans for them, have not been locked in with golden handcuffs and have been given absolutely no comfort about job security.
Many of the fund manager posts at ANAM are well paid.
Britannic, which runs more than (pounds) 14bn in Glasgow, has been hopeful ANAM would be put up for sale and that it could buy it and keep the (pounds) 28bn of funds in Glasgow, sources familiar with Britannic have said. ISIS has also been standing by to compete in any auction of ANAM.
Sources thought it likely State Street would manage the ANAM funds, which will contain a heavy bond as well as equity element, in index-tracking vehicles.
Observers had believed that Abbey National could realise about (pounds) 200m by selling the contracts to manage what are mainly the life funds of Scottish Mutual and Scottish Provident.
However, the senior fund management executive said of an outsourcing deal with State Street: “I would think it is a strong possibility. It is an easy way of doing it. You don’t have all the pain of doing an auction (of ANAM) and doing the due diligence. It wouldn’t surprise me for State Street to…pay a lump sum (to Abbey) to get to do the outsourcing. They may actually have done both – they will just call it outsourcing in the public face of the world..”
Another senior industry source said: “It wouldn’t be good news if that happened – for Scotland or Glasgow – if that money is outsourced.”
Abbey National declined to comment when asked about an announcement regarding outsourcing to State Street.
Richard Lacaille, chief investment officer of State Street Global Advisors, refused to comment, as did Jeff Conway, the US giant’s managing director of investment services in London.
An Abbey spokeswoman merely referred back to a statement last month, which said: “There is a project under way to determine the way forward for our investment activities. That is still under way. It is an extensive project really -covering all the options. The aim is to find the best way for us to meet the needs and expectations of our customers and investors.”
The Herald highlighted back in September serious doubts over ANAM’s future, when it emerged the bank was axing the ambitious Talorcan hedge fund arm. Abbey has also been outsourcing the investment of retail funds sold to its customers. Abbey’s fund management division was last month fined (pounds) 320,000 by the Financial Services Authority for systems and control breaches.
