When Coutts Bank decided to make the move from in-house investment management to external investment management, it did so in one year. "If you have a large gap to cross, you don't do it with two small steps," explains Andrew Hutton, the bank's head of investment management and group investment management.
Hutton joined Coutts in 1997 when the bank was going through a business rethink. It had portfolio managers in 11 different locations, who worked alongside the relationship managers putting together individual portfolios for clients. "The business was being run as a traditional private-client stockbroker, so that portfolios typically had 30 to 40 securities, some gilts and a smattering of third-party unit trusts," Hutton says.
The problems facing Coutts were threefold: investment performance was only average, dispersion of returns was fairly wide because every client's portfolio was a bit different, and the business was losing money.
The bank had two choices – either to re-engineer the asset management offering completely, or to improve the present offering. It chose the former.
The bank decided to differentiate itself by moving to a multi-manager product solution. A team of 11 at Coutts would select the best managers across the long-only asset classes, and create funds of hedge funds.
