Exit stage left – Cuffe to leave CFS

The announcement byColonial First State(CFS) that its long running and high profile chief executive, Chris Cuffe, was resigning from the organisation has surprised few.

That has not stopped the circumstances surrounding Cuffe’s departure from being described as anything from a face saving exercise by Colonial, to an exercise in out-and-out cynicism.

Cuffe, who has been the group’s chief executive since 1990, has been on an extended leave of absence since July 2002.

Despite continuing market speculation, Cuffe and CFS had, up until the official announcement of the resignation, insisted that he would return to head up the organisation.

That he won’t has only furthered speculation that Cuffe always intended to leave CFS, and that the manner of his departure was engineered for minimum publicity at the end of a year in which CFS had also lost Greg Perry, its highly respected head of Australian equities.

The timing of the resignation announcement, made on New Year’s Eve, has only reinforced such perceptions, and brought a quick response from analysts.

The Lonsec research group said:

“It is difficult not to be cynical about the manner and timing of Cuffe’s resignation. Cuffe has been on extended leave since the middle of 2002. Despite strong market speculation to the contrary, CFS has continually denied that Cuffe’s extended break would end with a permanent hiatus from the organisation.”

Van Eyk Research was equally scathing:

“Chris Cuffe’s leave of absence over the past six months created considerable conjecture surrounding whether he would actually return from leave. In the end, the July 4 departure date appears to be a face saving exercise for both Chris and Colonial.”

Cuffe will in fact return to CFS in February, but only until July 4, when he will hand over officially to his anointed successor, the group’s former general manager of investments, John Pearce.

The move for Cuffe to return at all is already being questioned by analysts, particularly given that Pearce, who has been groomed by Cuffe for the role for the past 18 months, has effectively been running CFS in Cuffe’s absence.

Lonsec’s head of managed funds research Grant Kennaway says:

“[Cuffe] is coming back into what is effectively a lame duck role. You have got John Pearce who has been running things for six months. It is hard to understand the necessity for Chris Cuffe to come back. There is also the possibility of John’s toes being stepped on while there are two people running the business.”

Within CFS, it is clear that Cuffe will take a back seat role until his departure.

In an interview withMoneyManagement, Pearce made it clear he would be leading CFS from now on, with Cuffe seeing out his time with the group in a more consultative role.

“In a practical sense, Chris will be taking a very hands-off role. On a day-to-day basis, I will be running the show,” Pearce says.

Despite his long running tenure as CFS’s chief executive, and the nature of his departure, Cuffe’s resignation has yet to cause the doubts about CFS’s funds management capabilities that surfaced after Perry’s departure.

Van Eyk Researchmanaging director Stephen van Eyk says:

“[Cuffe] didn’t manage the money. He created the environment to manage the money in, and did it quite successfully.”

It is also understood that Pearce is well respected amongst the CFS investment team, lessening the chance of any negative internal repercussions as a result of Cuffe’s departure.

However, analysts are also quick to point out that CFS is no longer the same organisation that Cuffe, along with Perry, led to such success over the last decade.

The fund manager, which started out as a boutique with a strong emphasis on Australian equities, is now very much the large funds management arm of the Commonwealth Bank, with an emphasis across all asset classes and some question marks over the large sums of money it is managing.

The group has also over the last 18 months made a concerted push away from purely managing money, placing a greater emphasis on the distribution of funds management products, most notably through its new FirstChoice master trust platform.

“Chris Cuffe has been responsible for growing the business in a dramatic way and in some ways it is now in consolidation phase. Cuffe developed a manufacturing capability and CFS was always known for manufacturing good funds management products. Now they are at the stage where there is a growing emphasis on distribution, including through the likes of FirstChoice,” Kennaway says.

The question now is how far down this new path CFS will go with Cuffe no longer at the helm.

Stephen van Eyk says:

“In the back of a lot of people’s minds is that Cuffe, having built the business and being the strong manager that he was, may have been resisting a lot of the things that the [Commonwealth] bank has been proposing.”

Either way, Cuffe’s departure spells the end of an era at Colonial.