Dramatizing banks' difficulties in retaining top-flight money managers, three executives have fled SunTrust Banks' Orlando-based capital management unit to set up shop across the street.
The exodus amounts to a major shakeup in the top ranks of the Atlanta company's SunBank Capital Management, which oversees $11.4 billion in assets.
Gone are a highly regarded mutual fund manager, Gregory M. DePrince, and two executives who joined the unit at its launch 16 years ago - president John D. Race and marketing chief Victor A. Zollo Jr.
Their new firm, DePrince, Race & Zollo, says it expects to take away about $1 billion of business - more than one-third of the amount Mr. DePrince personally oversaw.
"It caught us by surprise," said Anthony R. Gray, chairman of SunBank Capital. "They had been with us for a long time."
SunTrust isn't the first big bank to be hit by defections in the money management ranks.
Last month, Chase Manhattan Corp.'s star mutual fund manager, Mark Tincher, quit to direct equity investments at PaineWebber Inc.'s mutual fund arm.
And Republic National Bank of New York lost an entire team of money managers, headed by Michael D. Hirsch, to Freedom Capital Management, a Boston-based subsidiary of John Hancock.
Industry observers say money managers frequently chafe at the bureaucratic ways of banks. What's more, compensation is often a source of friction, because successful money managers command higher salaries and more perks than most chief executives at banks.
Mr. Gray acknowledged that banks find it tough to compete with the kinds of entrepreneurial opportunities talented managers can get on their own.
Although SunBank Capital Management has had bonuses and a profit sharing system in place since 1987, it couldn't offer the executives a stake in the money management unit itself.
"What we didn't have is ownership," Mr. Gray said. "That's what motivated them" to leave.
One bank that confronted a similar dilemma is Comerica Inc. Last November, the Detroit banking company spun off most of its money management business to Munder Capital Management, Birmingham, Mich.
The arrangement enables Comerica to give money managers an ownership stake in a unit whose profit potential is greater than that of its parent bank. The approach "addresses the revolving-door talent syndrome that has plagued the banking industry," said Lee Munder, chief executive of Munder Capital.
But other observers have their doubts about banks' ability to attract top talent over the long haul.
"In the mutual fund industry, there is a pecking order," said John A. Rekenthaler, associate publisher of Morningstar, a fund-tracking service in Chicago. And, he asserted, "Banks are at the bottom of that pecking order."
Mr. Rekenthaler added that the departures at SunTrust will probably force the company to "reinvent" the value-investing team that Mr. DePrince headed. Value-investing is a style of money management that focuses on a company's intrinsic value rather than its profit stream.
But SunBank Capital maintained that it has ample bench strength. Mr. DePrince's partners on the value-investing team - Mills Riddick and Ryan Burrow - remain with the firm.
