AS B OF A MULLS MELDING ASSET FIRMS, ONE SUFFERS MASS EXODUS: FOUR-IN-HAND A KNOTTY PROBLEM

Executives have a lot of work to do before Bank of America becomes a one-stop shop for institutional, mutual fund and high-net-worth clients.

Leaders of the newly formed Bank of America Asset Management Group have yet to decide how to organize a group of four institutional management firms to create a number of integrated investment platforms and investment products.

“If clients have a need, we will have a factory of sorts to deliver it,” says Michael Kenneally, recently appointed to oversee the creation and management of all investment management products.

But Bank of America Asset Management Group has already hit a snag in the integration process, losing eight employees from one money management subsidiary.

The asset management group now has $231 billion in assets under management, about $36 billion of which is from institutions, $71 billion from mutual funds and $124 million from high-net-worth clients.

Mr. Kenneally, who is president and chief investment officer of Bank of America Investment Management, the Bank’s private asset management firm, which is also part of the overall group, is leading the effort to combine the institutional money management firms of Chicago Equity Partners, Sovran Capital Management Corp. in Richmond, Va., TradeStreet Investment Associates Inc. in Charlotte, N.C., and Boatmen’s Capital Management Inc. in St. Louis into an investment management powerhouse.

Segments of the asset management group will, minimally, operate in Chicago, Los Angeles, St. Louis and Charlotte, Mr. Kenneally says. He expects to decide early this month about where the “investment platforms” will be based and what names they will go by.

Chicago Equity Partners will maintain its identity and location, Mr. Kenneally says, because it had a specific contract with Bank of America employees when the firm was launched in January. Executives of the group will focus on investment management, distribution and client service, he says.

likely to add analysts

On the investment management side, the firm is expected to add analysts to the research teams.

By maintaining independent research and a more focused investment approach, Bank of America executives think their investment professionals will be better able to produce “a suite of investment products,” Mr. Kenneally adds.

The number of portfolio managers the new organization will use is not yet known, but spokesmen for the company say it is set on the idea of growing, not shrinking.

Bank of America’s recent troubles with Sovran Capital Management are a perfect example of the sort of problems that can result from a change in management structure.

Sovran’s investment management subsidiary lost clients when eight employees left in September to start their own firm, Agincourt Capital Management LLC.

Sovran is suing the new Richmond, Va., firm and the eight former employees, claiming they breached their fiduciary duties by making arrangements to start the new company and soliciting clients while working for Sovran.

The lawsuit alleges that while working at Sovran, they were negotiating a joint venture with Bank of America and were also making plans to form their own company.

Named as defendants were: Bradley Coats, president of Agincourt; Patrick O’Hara, managing director; Lewis Duncan Buoyer, Patrick Kelly, William Armes and William Putnam, portfolio managers; Laurie Haynie, marketing analyst; and Brian Scott Marshall, analyst.

“This complaint is a continuation of the bullying tactics that led us to resign from Bank of America… Charges that we solicited clients before resigning and/or walked out with proprietary information are totally false,” Mr. Coats says.

Agincourt now has $2 billion under management and about 20 clients, Mr. O’Hara says.

Officials at Bank of America would not discuss concerns about investment management professionals leaving the fold, but did restate that the bank’s strategy is about increasing, not decreasing, size.

At Atmos Energy Corp., Steve Harmon, director of compensation and benefits, decided to move the pension fund’s $90 billion domestic bond portfolio to Agincourt. Sovran had managed $41 million of the $265 million St. Louis-based pension fund’s U.S. bond portfolio.

Mr. Harmon and plan executives at Universal Leaf Tobacco Co. Inc. in Richmond, Va., insist they were not solicited by the ex-Sovran employees. Universal trustees decided to move Sovran’s $36 million portfolio to Agincourt, says Karen Whelan, vice president and treasurer overseeing the $124 million fund.

Crain News Service