Pesky start-ups, higher costs and weaker markets have left bulked-up money managers searching for growth opportunities.

By David Lanchner
November 2000
Institutional Investor Magazine

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So much for the logic of consolidation.

After several years of poor performance in its value-oriented portfolios of stocks and bonds, Swiss money manager UBS saw new money inflows fall and profits decline by 26 percent in 1999. Europe's largest investment firm has also had to contend with wrenching change as it tries to bring London-based Phillips & Drew and Chicago-based Brinson Partners under its own brand. Tony Dye, who headed Phillips & Drew, and Gary Brinson, founder and head of Chicago-based Brinson Partners, resigned under pressure in March, leaving chief executive Peter Wuffli to integrate the UBS subsidiaries.

"We suffered from some short-term performance issues last year," says Wuffli. "Even though our value portfolios are now doing well, we decided to strengthen our global research platform and expand the range of our investment products. Now we can offer clients nearly any kind of portfolio they want."

Like many of its global counterparts, UBS finds itself in a bind. As it spends freely to create a unified brand name and deliver the products and services demanded by a diverse, worldwide customer base, the money management firm is also competing in a slower-growth, fee-conscious marketplace. And a new generation of index funds, private equity investors and hedge players are all vying to claim their own piece of turf. Then there is talent. Keeping star portfolio managers and their teams together is increasingly expensive as opportunities open at rival firms and start-ups. In the background, the world's longest-