A founder of Souls Funds Management has been sacked by its backer, Washington H. Soul Pattinson (WHSP), after disagreements over FUM targets and the level of staff equity in the business.

Vincent Parrott, a founder of Australian equity manager Veritas which sold a majority stake to listed conglomerate WHSP and was renamed Souls in 2003, had his chief executive’s contract terminated on July 31. “;I have long emphasised the need for patience in growing the business, particularly the relatively new large cap capability, and the essential requirement to have a meaningful level of staff equity ownership in order to secure the investment team. Most of these views have fallen on deaf ears,”; Parrott told I&T News. The Souls board had an expectation for strong FUM growth in 2007/08 which was “;unrealistic in the environment”;, Parrott said. Meanwhile the level of staff equity was declining. Following the withdrawal of his 5 per cent-plus stake, Parrott said staff equity was about 21 per cent, “;leaving Souls as a boutique with one of the lowest levels of staff equity ownership in the industry”;. Parrott had also disagreed with WHSP’s decision not to renew Souls’ advisory mandate for the listed Brickworks Investment Company, which is majority-owned by WHSP. Souls’ five year contract expires on December 1, after which the Brickworks board has decided to take funds management in-house. Souls’ assets under management and advice will fall from approximately $800 million to $400 million as a result. Following Parrott’s departure, fellow Veritas founder and current Souls FM company secretary, Stephen Hanich, is acting as chief executive. Hanich said the long-term incentive scheme, which involved full-recourse loans to staff, had become “;unworkable”; and was being restructured to better meet its objective. Brickworks had terminated Souls’ advisory mandate in order to “;lower the MER”;, Hanich added. The budget for 2008/09 was also being redrawn, he said, adding that the search for a permanent replacement for Parrott was underway, co-ordinated by WHSP. The third Veritas founder, Andreas Stephen, remains on the six-man Souls investment team lead by Frank Villante. Over five years to July 31, Souls has modestly outperformed in Australian equities (net 15.09 per cent against All Ordinaries’ 14.7 per cent) but underperformed in its small caps specialty (13.5 per cent vs Small Ordinaries’ 15.58 per cent. Parrott said he would be evaluating future opportunities in the funds management industry. The chair of WHSP, Robert Millner, could not be reached for comment.

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