Merrill’s asset management business, MLIM, is getting back to its retail roots. Originally established in the US to serve the private-client business, MLIM grew, in part by the acquisition of mercury Asset Management in the UK, to become an institutional asset manager. Now, says Bob McCann, vice-chairman of the wealth management group that comprises GPC and MLIM: “We have developed a third-party retail business that is profitable and growing fast.”
The relationship between MLIM and retail clients, however, has not always been smooth. One ex-MLIM colleague says: “Performance often struggled, and the European and US cultures did not always meld well.”
In 2000 under Stan O’Neal, there was a concerted effort to separate manufacturing and distribution so that the P&Ls for GPC and MLIM are now broken out individually. At the same time, an open architecture approach was put in place, most prominently in the US, so that today only 30% of GPC’s customer mutual fund assets are in MLIM products. Bob Doll, president and chief investment officer of MLIM, then proceeded to restructure the business, which has seen headcount drop from 4,000 to 2,600 over three years.
The huge exodus, however, was not well received by those in Merrill who stayed. “When redundancy was offered, many more people than expected took it. The result was that there was no continuity as to who was doing what on the investment management side. No-one in GPC knew who they were supposed to be talking to,” says the source.
Doll’s restructuring efforts, however, seem to have paid off. At the end of May more than 70% of global assets under management were outperforming their benchmarks, and senior management are hoping to see at least 40% of GPC’s mutual fund sales track to MLIM.
Rumours that Merrill Lynch is considering selling all or part of MLIM to Legg Mason have also been quashed. McCann says: “We like the investment management business and want to grow our presence. In doing that we’re considering a full range of opportunities both organic and non-organic, but any reports we’re considering selling our business are not accurate.” Rather, research from Deutsche Bank’s analyst Richard Strauss says that Doll has floated an idea for growth that entails an ownership structure in which Merrill Lynch has less than a 100% stake in the asset management subsidiary.
