Deutsche Bank To Tighten Reins As Funds Plot Thickens

Trading in three funds managed by Deutsche's Morgan Grenfell Asset Management (MGAM) unit was temporarily halted this week following the suspension of a key manager, Peter Young.

Deutsche Morgan Grenfell spokesman Markus Will told Reuters yesterday the bank had issued an injuction against Young, seeking to determine whether he was personally linked to some of the holding companies held in the fund's portfolio. We injuncted Mr Peter Young since we suspected that he may have connections to some of the holding companies he had held in his portfolio, Will said.

Attempts to contact Young to comment on the Morgan Grenfell statement were unsuccessful. Young's assets were frozen as a result of the same injunction.

In Frankfurt and London, senior officials from both Deutsche Bank and investment bank Deutsche Morgan Grenfell admitted to a breakdown of controls and supervision.

Deutsche board member Rolf Breuer was quoted as telling the business daily Handelsblatt, We are pushing for substantial improvements in internal controls.

Amid reports that Deutsche might put its London funds management business under tighter Frankfurt control, Breuer said Deutsche was also reviewing whether MGAM's investment philosophy suited Deutsche Bank's rather more conservative approach. Before his suspension Young had invested heavily in speculative high-technology stocks, many of which were not listed on stock exchanges.

Sources said Young's holdings had exceeded the maximum 10 per cent limit on such unlisted stocks and he had been ordered to reduce them to five per cent. Rather than reduce the holdings, however, Young is alleged by Morgan to have set up more unlisted holding firms, according to remarks attributed to the investment bank reported by Financial Times newspaper.