Nicola Horlick first heard the expression the A-team applied to SGAM in 1997 when she was interviewing a fund manager for a prospective job in her fledgling company.
“I asked why he wanted to join here and he said, ‘I view you as a bit like the A-team. You’ve all been accused of things you didn’t do.’ Which is quite clever and quite right.
That’s exactly the point. We’d all been accused of things we didn’t do,” she says.
While Horlick’s problems were perhaps the most widely documented of the SocGen team, Keith Percy and John Richards also had their own difficulties.
Until September 1996 Percy’s record in fund management was unrivalled. Asked by Phillips&Drew to establish its new fund management arm in 1982 he took it from £3 billion to £17 billion in assets under management eight years later.
He then moved on to the new challenge of turning round Morgan Grenfell which he did, aided by Horlick. By the time the Peter Young affair blew up it was challenging the UK’s big four houses. A lot of his clients were very upset by his subsequent departure and goodwill remained strong towards him throughout his two-year battle with Imro, the fund management regulator, which was eventually settled.
Meanwhile when John Richards chose to leave Mercury in 1997 his departure happened to coincide with a downturn in performance at the firm. People were quick to judge that he was a rat deserting the ship, an impression Mercury did not seek to change. Although he has to accept some responsibility for the initial problems, he argues that it is unfair to pin any blame to him for performance a year or more down the line.
“There was a perfectly good argument on the part of the Mercury people to say John Richards was in charge of the team and he’s gone and now we’re making changes,” says Richards. “It’s very difficult to resist the temptation to pin whatever it is on somebody who’s just left. I did well at Mercury and I can’t be held responsible for Mercury’s performance in 1997. I left in May. My track record when I was at Mercury and the track record of the people I was working with going back to the early 1980s was excellent.”
He argues that he left with a clear conscience. “When I left I was pretty upbeat about what I had achieved at Mercury and what we could achieve at SG,” says Richards. “The fact that Mercury’s performance went wrong wasn’t helpful to my reputation, even though I wasn’t there. On the other hand, these things happen and when I look back now, I have been running money since 1985 and I think I have a track record that stands up to scrutiny.”
So can he put his finger on what happened at Mercury? “A lot of the poor performance in early 1997 was really due to cyclical stocks and the fact that the pound had risen 30% or 40% against the Deutschmark in 12 months,” he says. “Being underweight in some of the larger sectors. I don’t think it was anything extraordinary other than getting a few major sector calls wrong but the way the markets began to perform from 1996 onwards was such that these things could be carried to quite big extremes and it has carried on that way.”
He adds that it’s always easy to criticize with hindsight. “If people could have predicted the volatility in the markets that has been here in the last few years then obviously they might have been a bit more circumspect about the positions they were taking in the sectors.”
With all these added difficulties, Horlick says she was concerned by the difficulties of launching a business from scratch. “One of the things I feared was that companies wouldn’t come to see us any more because we were small and insignificant because we didn’t own any shares,” she says. “And they did come to see us, presumably out of curiosity to begin with.”
Things have changed three years down the line. “Now we’re on the map as being important so they have to talk to us but I think they would anyway because they think we’re quite challenging and interesting people to talk to and we’re going to throw interesting ideas at them about their business.”
In the end the publicity surrounding the departures of Percy and then Horlick attracted banks looking to make a mark on the UK. Their reputation preceded them.
“I never thought it would all end up in the newspapers in the way that it did, or that people were trying to attribute all sorts of faults to me that I didn’t have about taking teams of people to other banks,” says Horlick.
“It’s true that people had approached me. It’s hardly surprising. Keith had left. We had been the most successful institutional business up to that time over the previous five years.
People obviously were interested to employ us. They could see complete turmoil [at MGAM] and people did approach us.”
Now with the success of the new firm, Horlick feels vindicated. “At the end of the day our success has demonstrated that the truth will always come through in the end,” she says. “We are very professional. We have a very strong work ethic and a very clear idea of how things should be done and a very strong culture which we have been able to recreate here.”
For Percy’s part, he is glad to have had the opportunity to restart a career that at one stage looked as if it could be over. “It was going terribly well at Morgan Grenfell and in many ways the best period was still to come. Things could all have been very different if Peter Young had not happened.”
He adds: “Given that it did happen, it has been very exciting. I had never done a start-up before and it’s much harder than people imagine because the barriers to entry are quite big. If you start off as a man and a dog, then people won’t come to you so you have to put in the resources to get the assets. But then the big assets that you want to make a profit with the big costs that you’ve incurred all want a three-year track record. So we’ve only just got there.”
Percy freely admits that it was a bit of a gamble and things could have been very different. “There are big barriers to entry, and supposing in year one and two we had had dreadful performance figures, with all the costs we had put in…”
However he says that while there is still a lot of hard work in front of the team, he is delighted with progress to date. “To have got where we are, coming through the adversities we’ve faced, I’m pretty pleased with that.”
In fact as the original A-Team’s Hannibal Smith might have said: “I just love it when a plan comes together.”
The A-team anatomized
Percy: the boss. Unlike Hannibal Smith, Percy does not hold a fondness for cigars. However, having masterminded the success of PDFM and turned around Morgan Grenfell Asset Management’s fortunes, he has an impressive track record in the business of managing investment houses. Caught up in the Peter Young business at MGAM he was forced to leave in September 1996 but resurfaced full time at SGAM in 1999 after reaching an agreement with the regulators. Now happily reunited with Nicola Horlick.
Horlick: The face of SGAM. She claims to be an unwitting participant in the Horlick hype. However having her image on bill posters in numerous tube stations around London and on all the firm’s advertising will not lower her profile. Made her reputation at Mercury and Morgan Grenfell before falling out with Percy’s replacement Sir Robert Smith. Famously went to Frankfurt with a press pack in tow to argue over her treatment with the powers that be but ended up leaving.
Richards: The investment whizz. A big force behind Mercury’s elevation to the top of the UK institutional fund management tree in the 1990s, taking up the baton from Leonard Licht. Started his career at SG Warburg on the same day as Horlick. Now in charge of SGAM’s asset allocation, he said the opportunity to work with Horlick again was “one I really couldn’t miss”.
Rufus Warner: Provides the marketing muscle. Big and balding, Warner is an imposing presence. Considered a Navy career before the City and worked with Horlick and Percy at Morgan Grenfell. One of the first to join her at SGAM in the summer of 1997, the firm’s marketing director is not afraid to tackle journalists head on.
