Soundoff

Q: What are you doing to keep talented money managers from leaving your bank?

Call it the flight of the money managers. Recent departures of investment pros from bank-affiliated asset management subsidiaries are giving fits to the bosses left behind.

Last month, Chase Manhattan Corp.'s mutual fund manager, Mark Tincher, quit to direct equity investments at PaineWebber Inc.'s mutual fund arm.

Republic National Bank of New York recently lost an entire team of money managers, headed by Michael D. Hirsch, to Freedom Capital Management, a Boston-based subsidiary of John Hancock.

Two weeks ago, three top executives at SunBank Capital Management, the Florida-based money management arm of SunTrust Banks Inc., left to start their own investment management firm right across the street.

And in the latest round of departures, 20 employees, including 10 top executives, last week quit Mellon Bank Corp.'s asset management's subsidiary to set up their own firm in Boston.

Sources familiar with the money management industry say such shuffles are common among mutual fund companies and investment management firms. After all, star managers are entrepreneurial sorts and the opportunity for ownership is highly enticing.

Banks clearly have two basic concerns on their hands. For one, they fear that defections will hurt their name and relationship with customers. It certainly hasn't helped Mellon's reputation to have news stories detailing the exodus of two separate waves of employees from its Boston Co. Asset Management unit.

Also, banks are not typically structured to pay money managers the kinds of high salaries they can make elsewhere, or to offer them ownership - two reasons managers often cite for leaving banks.

Recently we set out to ask bank executives to discuss the steps they are taking to keep their best money managers from leaving. The topic is clearly a sensitive one, as most of the bankers contacted declined to comment.

But the following three bankers gave the question a go. Richard C. Caldwell Executive vice president, Investment Management and Trust, PNC Bank Corp. Pittsburgh

The first thing do is recognize that people who are focused and intelligent enough to manage money effectively and articulate enough to gain other people's confidence in their management abilities are a rare thing. Therefore we go to some pains to try to create an environment that works for them.

We've created within the company a registered investment adviser to act as a holding company for individual subsidiaries, within which our various money managers operate.

What this gives us is a smallish, more entrepreneurial environment that money managers like, one where each subsidiary has its own compensation program that allows them to participate in the success of the firm. Also, the freedom to act and compensation consistent with what they bring to the table are critical.

But it's also important that a large institution bring something else to the table, beyond the environment and the compensation. What we have to offer is superior distribution.

For example, we have primary banking relationships with 70,000 corporations across the U.S., and we can provide very strong introductions to our money managers that way. But not all good money managers are able to take advantage of big distribution systems. Those who can really thrive in an environment like ours. J. Stephen Baine President, First Chicago Investment Management Co. Chicago

We've done two things.

First, we formed a separate investment management subsidiary in order to develop a culture that is more akin to a money management firm than a banking organization.

Our organization is not hierarchical, so we tried to make it an open exploration of ideas and good communication.

Also, we have targeted the investment business to clients of the bank, so that people who work in the subsidiary feel that their careers are enhanced by the relationship with the bank.

And because we work well with people in the bank and we serve their clients and they provide introductions, we get more business - and there is a reason (for money managers) to stay around.

We have also developed compensation programs that are characteristically found in professional investment firms. We looked at how professional money management firms, in particular the mutual fund firms and some of the boutiques, compensate their investment people, and we applied those principles.

We want the income opportunity and the structure of that opportunity to be like those at other firms. That way, there is no particular reason to go to these other firms. James B. Sommers President, NationsBank Trust and Investment Charlotte, N.C.

All money managers are investment people, whether they're at a bank or not.

One of the key components is seeing that they are able to deal with professionals and not have to be encumbered by interfacing with people who are not actively engaged in the investment business.

We have been successful in maintaining our own people here in the bank as well as in the independent firms acquired through acquisitions.

The first component we consider is compensation. We annually run surveys against the appropriate benchmark positions in banks and nonbanks in order to look at absolute levels of compensation, including pay and bonus.

The second component is independence. We are running about $56 billion of assets here, and our investment managers group in the bank have several small registered advisory firms that have come in through mergers and each of them has maintained its independence and its status.

Take Sovran Capital Management, for example, a very fine fixed-income manager. They do their own marketing, they do their own solicitation and make their own decisions.

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