A team of high-profile money managers is defecting from Merrill Lynch & Co.'s Los Angeles-based unit formerly known as Hotchkis & Wiley, the company confirmed Thursday.
Sarah Ketterer, Harry Hartford and James Doyle, who manage the $1.4-billion Mercury HW International Value fund and a total of $3.2 billion, including institutional assets, have resigned, Merrill spokeswoman Christine Walton said.
Sources say Merrill is seeking to sell the former Hotchkis unit, which it bought in 1996 for an estimated $200 million to $300 million, and that lead manager Ketterer and her team are expected to launch an investment firm in the L.A. area.
Ketterer, the daughter of Hotchkis & Wiley co-founder John Hotchkis, declined to comment on her plans.
Walton would confirm only that Merrill is "reviewing strategic options, which may or may not include a sale of the Los Angeles unit." The unit manages a total of about $10 billion.
She said London-based portfolio manager James MacMillan will take over the Mercury HW International Value fund, which has lost 4% this year but gained an annualized 8.4% over the last five years. The fund ranks in the top quartile of foreign stock funds for both periods, according to Morningstar Inc.
"The Ketterer team has had a lot of success, so this will be a loss for Merrill Lynch, obviously," said Morningstar analyst Gabriel Presler. "It's going to be hard to step into those shoes."
Still, she noted that MacMillan has fared relatively well as manager of Merrill Lynch EuroFund, which he took over in April 2000. The fund is down about 11% year to date, but has beaten 95% of its peers over the last 12 months.
Sources said Merrill's Hotchkis purchase has been eclipsed in importance by subsequent money manager acquisitions, especially its $5.2-billion deal in 1997 for London-based Mercury Asset Management. That purchase added about $177 billion in mostly institutional assets, according to InvestorForce.com.