Saturday profile: Katherine the Great's latest coup is a sign of growing ambitions at Dundee group

Published on Friday 28 August 2009 22:15

KATHERINE GARRETT-COX has pulled. And those getting their coats and following the chief executive of the venerable Alliance Trust from Edinburgh to Dundee this week were the fixed income team at Scottish Widows Investment Partnership (Swip).

It is either a coup for Garrett-Cox or a bad sign for Lloyds Banking Group-owned Swip.

Since Lloyds recently decided to divest itself of Insight Investment Management to Bank of New York Mellon, Swip was the top asset manager dog in the Lloyds group.

Any worries that Insight's hot fixed income team would wipe the floor with that of Swip's were clearly diminished.

But still Rod Davidson, Swip's global head of fixed income, and three others from his team, left the travails of government-backed, economic disaster-rocked Lloyds decided to take their chances with Garrett-Cox instead.

It could be some form of justice for Garrett-Cox, who earlier in her stellar career put on her walking boots when she worked for Lloyds TSB-owned asset manager Hill Samuel. In 1999 Lloyds bought Scottish Widows, and the next year merged Hill Samuel with Swip.

If the bank had hoped to keep its top talent after the merger they were sorely wrong. Garrett-Cox, Hill Samuels' top stockpicker, was snubbed for a top job at Swip. Nor, it was reported, was she keen on moving from the City to Edinburgh. So she took her team – and her investors – across the road to Aberdeen Asset Management (AAM) where, at 33, she became the youngest person to join the board.

At Hill Samuel, young Garrett-Cox had made her reputation investing in American equities. As the manager of the American Growth she outperformed the indices.

Technology was a big part of it – she bought shares in a little technology company in 1993 called Microsoft for $10 and six years later they were worth ten times as much.

It was as one of the youngest – and most attractive – fund managers of the time that she earned the moniker that has haunted her since: Katherine the Great.

Although her husband, an investment banker, once joked to a newspaper reporter he sometimes called her that at home, she has admitted she really does not like it.

As a mother of four with a City-sized seven-figure salary, she has over the course of her career attracted far more media attention than her mostly male peers.

Yet as chief investment officer of AAM when the split cap crisis nearly brought the company to ruin, she seems to have been let off the hook. She oversaw American equities there but also launched a New Jersey-based split capital investment trust, the American Monthly Income Trust – albeit the high-yield shares were managed by her team member and fellow director Chris Fishwick.

It was Fishwick who carried the can and became "the unacceptable face of capitalism" – as described by the Treasury select committee looking into the industry-wide collapse in funds which caused misery for more than 50,000 investors.

Says one industry insider: "In all the conversations about split caps her name hasn't come up as being a guilty party."

In light of recent banking problems, the split cap crisis appears perhaps like small beer. But at the time, Garrett-Cox was one of eight directors to resign from the board of AAM. A year later in 2003, and following the birth of her third child, she left to join Aviva-owned Morley Asset Management. Four years at Morley gave Garrett-Cox a relief from the media spotlight until she decided to move to Dundee to take the chief investment officer job at Alliance Trust in 2007. She had been wooed by its then chief executive Alan Harden for nearly a year. And it was thought she relished the escape from the institutional strictures of an insurance-giant owned asset manager where she struggled to make her mark.

"Moving to Alliance Trust was a good move for her – she had a lot more control over a small organisation.

"It is fair to say she is not being paid as much to work at Alliance – but she has a lot of freedom. She is a bigger fish in a smaller pond," says an industry watcher.

Mark Tennant, the new chairman of Scottish Financial Enterprise, has watched her career with interest, having left Hill Samuel a few years before she joined.

"I think she is one of the most able fund managers of her generation," says Tennant.

However, after Garrett-Cox took the top job from her champion Harden last year, the performance of Alliance Trust has only been middling – even taking into consideration the economic crisis.

Although many suggest her active management of the group's assets – a move from equities to cash was done in May 2008 at just the right time – is both astute and intuitive, it has so far failed to dazzle.

"Alliance Trust's performance relative to their peers is pretty average," says Stephen Peters, an analyst with stockbrokers Charles Stanley. "A third quartile performance.

"There was a brief hope at the end of last year (the group would outperform] sadly it hasn't followed through this year to date. But what she is doing makes a lot of sense," says Peters.

One of these strategies is a long held aspiration to launch a fully fledged asset management group – as Garret-Cox calls it. It would be "an obvious and natural extension of what we are doing" but a change from the "olde worlde" approach of the trust.

So far the trust's asset management business is still a fledgling, as the group has fought the fires of global economic recession. But the hiring of Swip's fixed income team is a bold step in this direction.

But Garrett-Cox has no rash plans. In Dundee she and her team walk among investors in the trust who often stop them and tell them they are investing their livelihoods.

"I don't think Alliance Trust will ever set the world alight," says Peters. "But that is not its aim.

"If they wanted to charge bigger fees they could take on more expensive staff and do something different. That kind of connection with your client clientele is prohibitive and precludes the fund managers with wanting to take massive bets."

Tennant argues Garret-Cox has a firm hand on the group's future.

"I have no doubt Katherine will bring it into the 21st century, which is a good thing.

"But she hasn't changed it completely because there is something about Alliance Trust that should always be Alliance Trust.

"There are too few of those things around these days.

there are too many things that change too quickly," adds Tennant.

"And nine times out of ten they perform really well for a short period of time then they fall out of bed."