Twelve managers and analysts shown the door by McLean BuddenBy Alain Thériault | January 24 2012 09:54PM
In the wake of its merger with MFS, McLean Budden dismissed a dozen employees whose positions were judged redundant. One of its major clients is concerned. With the completion of their merger last November, fund managers MFS and McLean Budden created MFS McLean Budden. The two Sun Life Financial subsidiaries complement each other's specialties: MFS handles international markets, while McLean Budden focuses on Canadian markets. The 12 employees who were let go were mostly senior managers and stock market analysts.
Manulife Financial has nine funds managed by McLean Budden. In a newsletter sent to pension plan clients on Nov. 10, Manulife appeared to be worried. Called i-Watch, short for Investment Watch, the newsletter says the remaining U.S. managers lack experience in the Canadian market. Analysts writing for the newsletter, published by Manulife Investment Management Services, said they were also surprised at the speed at which the changes took place, describing them as “dramatic”. They bemoan the departure of several experienced managers and the end of the multi-manager team's right to vote. For all these reasons, they are placing MFS McLean Budden under watch.
“We will be meeting with key members at MFS McLean Budden and MFS Investment Management to assess the current situation,” the authors write.
The bulletin indicates that nine Manulife funds managed by McLean Budden will be affected by the merger: three Canadian funds, two balanced funds, a U.S. equity fund, another global equity fund, and two fixed income funds.
The bulletin adds that the Canadian funds will opt for co-management where a McLean Budden manager will act in tandem with another from MFS, rather than under the old system which used four or five voting managers. The growth fund will be managed by Bruce Murray from McLean Budden and Nicole Zatlyn from MFS. The value fund will be managed by McLean Budden's Susan Shuter and Jeffrey Morrison from MFS. The Canadian equity core product will be managed by all four of these people.
As for the McLean Budden's foreign equity mandates, they will be integrated with those of MFS over the next six months. Management mandates in fixed income are not affected. The McLean Budden global equity research team was the hardest hit by the cuts, where about ten of the original twenty analysts were let go. Those analysts who remain will be integrated into MFS's stable of 120 global research analysts.
McLean Budden confirmed the departures but differs from i-Watch on the issue of experience. For example, in an interview with The Insurance and Investment Journal, Alexandre Legault, a senior partner of the firm, pointed out that Nicole Zatlyn studied at McGill University and was managing a small portfolio of Canadian equities for MFS.
He explains that tandem teams of managers are replacing voting teams in order to take advantage of synergies arising from MFS's specialization in global markets. As for the U.S. managers, they can can learn more about the Canadian markets. What's more, Mr. Legault says that the firm is moving away from a management voting system where the majority rules to one that favours unanimous decision making.
Mr. Legault does not see the departures as a rapid exodus. “There's a logic behind these departures,” he says. “The merger resulted in duplication, especially with respect to the research teams. Some analyst positions became redundant. We asked some to stay on, others we did not.” The merger also opens up opportunities thanks to MFS's connections overseas. McLean Budden had tried to branch out from Canada earlier, but did not make much headway. “We were at the same time too big, and not small enough to have the profile of an exotic manager.”
McLean Budden's American approach was basically that of a plain vanilla fund, focusing on large, well-known companies. “Our platform followed four hundred companies, while MFS followed about 3000,” he comments. “The global equity team at MFS is present in nineteen countries and employs ninety people.”
The combination of the two entities also gives the smaller Canadian player access to a distribution network of more than 1700 employees. “We enjoy a significant synergy in business development, and in more than seventy-five investment portfolios.”
Mr. Legault also wants to emphasize McLean Budden's independence in respect to its shareholders. He notes that Sun Life owns 78% of the firm, while MFS employees own the remaining 22%. “They do not interfere with our decisions,” he says.