Two of the three portfolio managers from UBS Global Asset Management’s Australian small caps team are understood to be in advanced discussions with a boutique incubator.

Broking circles are alive with talk that John Campbell, Jeremy Bendeich and a junior analyst will soon join Bennelong Funds Management (BFM).

UBS GAM has confirmed it is “in discussions” with Campbell and Bendeich, however it’s understood that the third portfolio manager, Stephen Wood, will stay with the team that’s ranked third over the five years to December 2010 in Mercer’s Australian Small Companies performance survey (returning a gross 14.9 per cent against 5.5 per cent for the ASX Small Ordinaries).

Part of the Bennelong Group, BFM holds minority stakes in a number of funds managers, the best known being the Australian equity team made up of former ING Investment Management executives, including portfolio managers Paul Cuddy and Mark East.

BFM’s chief executive, Jarrod Brown, would not comment on whether a small cap capability would shortly be added to the BFM stable.

He did say that BFM was now approaching $2 billion under management, with a new $180 million mandate for the Australian equities ‘core’ product to be transitioned next week.