LIBERTY FINANCIAL REJOINING POLO CLUB WITH CREATION OF HIGH-NET-WORTH UNIT: BLUE COLLAR MEETS BLUEBLOOD AT STEIN ROE

Liberty Financial Cos. is trying to raise its standing among the rich and famous.

The Boston money manager, which has $54 billion in assets under management, has formed a new division aimed at clients with more than $1 million in investable assets. The unit, which is located in Chicago, is called Stein Roe & Farnham Private Capital Management.

“It’s an intelligent move,” says Neal Epstein, equity research vice president of Putnam Lovell de Guardiola & Thornton in New York. “A lot of companies are positioning themselves to go after the high-net-worth market right now.”

This isn’t Liberty’s first time at the polo club. The firm has been managing moolah for wealthy investors since 1986, when it acquired Stein Roe & Farnham, a Chicago-based mutual fund firm. Liberty currently oversees more than $8 billion in high-net-worth assets.

The problem, at least according to Liberty, is that managing both mutual funds and the accounts of affluent customers is too big of a job for one company. Its answer is to put Stein Roe’s $8 billion mutual fund business in the hands of Stephen E. Gibson, 44, who also happens to be president of Liberty’s Boston-based Colonial Group, which has $17 billion in mutual fund assets.

ziegler to lead unit

Hans Ziegler, 57, the former president of Stein Roe & Farnham, is taking the helm at Stein Roe Private Capital Management. Thomas Butch, 41, will continue as president of Stein Roe Mutual Funds, but he will report to Mr. Gibson.

“The management team at Stein Roe has been overseeing three different lines of business,” says C. Allen Merritt, chief operating officer of Liberty. “We decided it was best if they focused on wealth management.”

It won’t be easy. The big question is whether Stein Roe’s blue-blood pedigree will mix with Colonial Group, which comes from decidedly more blue-collar roots.

“Anytime you do anything involving two organizations there are natural issues to deal with,” says Mr. Merritt. “We feel it’s important to respect the cultures of both firms.”

It also remains to be seen how Mr. Butch will work with Mr. Gibson, the man who replaced him at the helm.

“My role here isn’t terribly changed,” Mr. Butch says. “I’m doing all the same things today as I was doing (before the announcement).”

Mr. Gibson’s command over the mutual fund families of Stein Roe and Colonial is striking because it crosses distribution channels. Colonial peddles its funds through intermediaries, or load markets; Stein Roe sells directly to investors, also known as the no-load market.

“There’s less and less distinction between load and no-load products in the marketplace,” the 58-year-old Mr. Merritt says. “Investors and distributors are seeing more frequently where no-load products get sold within a wrap product that a broker sells.”

The change in management is intended to give Stein Roe’s Mr. Ziegler more time to focus on attracting the assets of wealthy clients. Liberty hopes to have $15 billion to $20 billion in high-net-worth assets in five years, Mr. Merritt says.

The first step toward meeting that plan will be to bolster Stein Roe & Farnham Private Capital Management’s cadre of eight salespeople. Mr. Merritt declined to say how many salespeople will be added, saying only that “Liberty Financial is going to put more capital into the business.”

In recent years, Liberty has brought together a number of its business groups. For example, the back-office operation of Newport Pacific Management — its international investment management firm in San Francisco — was taken over by Colonial two years ago. And Crabbe Huson, the contrarian investment management company in Portland, Ore., which Liberty is buying, plans to sell its funds through Colonial.

Are there other high-profile management changes in the works at Liberty?

“It’s a pretty big step,” Mr. Merritt says. “We don’t see any other significant realignments in the future — or certainly not the near future.”