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November 2001

Leonard’s legacy


Leonard Licht and Mercury Asset Management retained an aura of invincibility in the 1980s and '90s. Even after Merrill Lynch bought Mercury, Licht's approach to UK fund management lingers.




       
Nicola Horlick
At the height of its powers in the 1980s and '90s as it raced to be the UK's number one investment house, reaching £100 billion of assets under management before it sold itself to Merrill Lynch, Mercury Asset Management retained an aura of invincibility.
Part of the reason that Carol Galley and her co-head, Stephen Zimmerman, sold the business in 1997 was because they had gone about as far as they could in their domestic market and wanted to explore the new frontiers in the US and Asia.
Yet the business had been built firmly around its performance in UK equities, on the conviction of the likes of Galley, Zimmerman and, perhaps even more so, Leonard Licht, a legend in UK fund management.
Among the young fund managers Licht brought into his team were Nicola Horlick and John Richards, both of whom now run SG Asset Management. In an interview with Euromoney earlier this year, Horlick's admiration for Licht's stock-picking skills was still clearly evident when she called him "the outstanding fund manager of his generation".
A rival at another UK house offers grudging praise. "Lenny Licht, Galley and Zimmerman built this aura of invincibility thanks to a few years of outstanding performance," he says. "However it didn't go on for ever."
And though most of the old team have since retired or moved on, the fund managers now working under the Merrill Lynch banner still operate with a good degree of discretion.
Indeed as Unilever's counsel, Jonathan Sumption, said in his opening to court: "Investment consultants consistently criticized the Select team for lack of controls." But the Mercury view that portfolios should be concentrated around a few stocks still commands support.
"They still have a lot of discretion, they're known for it," says one consultant, now turned fund manager. "Some consultants like that, and say: 'Well, at least they have the courage of their convictions.' But you can see that another way. They are arrogant."
The big bets that Alistair Lennard was taking for Unilever (selling out of UK banks and heavily backing industrials), while larger than those of some of his colleagues, resulted from the investment philosophy embraced by Licht who encouraged that conviction.
As one rival says of Licht and Mercury's approach: "They took big bets on big industrials. I was trying to spot opportunities in mid-caps where maybe there wasn't that much information but a consultant told me I was completely wrong because Mercury was making big bets on well-known companies it had researched really thoroughly."
He goes on to point out that this didn't always come off for them. "In the mid to late 1980s they held a large position in British Steel which everyone else knew about so they couldn't get rid of it and they took a hit there."






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