BACK in the days when HSBC Asset Management was called Wardley Investment Services, Graham Tilbury, former finance director of Hutchison, made a comment that goes to the heart of both the success and failure of Hongkong Bank's asset management arm. 'Wardley manages our money as if it has a divine right to do so,' Mr Tilbury said. Times have changed. It used to be that major corporations such as Hutchison, Swire, the major utilities, the Jockey Club and local universities instinctively asked the bank's asset management arm to run their pension portfolios. The bank was seen as the logical home for local corporations' assets and money came knocking on HSBC's door. That was its divine right. These days, that same money is knocking on a range of doors. New entrants to the territory's fund management industry have undermined the bank's previously unassailable position as the biggest name in town by providing a wider range of services, and - when it counted - better investment performance. A former senior executive at Wardley said: 'Its domestic business in Hong Kong is in demise. It is definitely losing market share to new entrants. 'As a business, I would certainly say it was moribund. It isn't growing.' Another former senior Wardley staff member said: 'Given the franchise it has got, it should rule this town.' Answering these criticisms, HSBC Asset Management chief executive Bob Duggins denied the operation was in demise. Instead he said: 'I'd say it was more a reflection of the number of competitors in the market now as compared to then.' There are quite a few ex-Wardley staff members in Hong Kong and most of them have far from happy impressions of their time there. They tell stories of culture clashes, personality clashes and eventual disillusion. The latest indication that the organisation was still in a process of evolution came last week with the sudden resignation of chief executive Tommy Thompson, which coincided with a restructuring of its insurance operations. The director of a major Hong Kong house and a former Wardley employee who worked with Mr Thompson, said: 'Tommy's skills were those of a relatively tough management type. But in my opinion he was lacking in investment and human skills.' Another said: 'He was brought in to wield the knife and that is what he did. He wasn't brought in to handle investment.' Mr Duggins said: 'Tommy is a good professional but his 'skill set' was not in the investment area. His job was to make people aware of the new global investment strategy and I think he did that very well.' Mr Thompson's job was - to an extent - to be unpopular. He was appointed to streamline the operation and his departure has more to do with the state of HSBC Asset Management than his own personality. For example, headhunters in Hong Kong confirmed Mr Thompson's job had been on the market for a while. A senior banking source said: 'A number of people in the industry were offered Tommy's job and basically fell about laughing at the prospect. Everyone knows the ins and outs of that job.' These so-called 'ins and outs' stem almost entirely from the organisation's history. Over the past eight to nine years, Hongkong Bank has either acquired or inherited a hotch-potch of fund management organisations via James Capel in London, Marine Midland in the United States, Midland Bank and Midland Montagu, as well as Wardley in Asia. 'It found itself with a whole load of entities doing similar things that were totally unintegrated. They had different styles, different philosophies, different technology, different people and huge duplication,' the former Wardley director said. It did not take long for the bank's senior management to realise that this was far from an ideal way to run a successful business. Restructuring became the order of the day. At the heart of the restructuring programme were two people - Bernard Asher, a main board member of the bank, and Tim Ferguson, head of global fund management. The former Wardley director, who helped implement these plans, said: 'Unfortunately they decided to restructure using a saw and a hammer - blunt instruments - rather than doing it with finesse. 'You ended up with US experts in the US, Asian experts in Asia and European experts in Europe, all of whom could talk about their own markets, but when it came to assessing the impact of one market upon another, their cross-market skills were lacking. 'The other problem was that at the same time the major asset allocation decisions were still being made in London.' This was the group's first attempt at restructuring. Since then, Mr Duggins said, these problems have been addressed and more autonomy has been granted to individual centres in making investment decisions and cross-market skills have been improved. But as the former Wardley director said: 'The problem with all the restructuring is that it made its international clients ask themselves what the group was doing in the first place. This led a lot of them to put HSBC Asset Management on hold until it had itself sorted out.' Mr Duggins said: 'I think we have explained [our moves] very successfully to our customers and we are not only getting new business but additional business from existing customers.' While HSBC Asset Management seems to have restructured itself into some sort of cohesive whole, there is still a problem - investment performance. The group has a reputation for being a 'conservative' house. It has traditionally invested less of its total portfolio in listed securities than rival houses. During 1993, when Asian stock markets were booming, HSBC Asset Management was roundly thrashed by its rivals. Figures compiled by actuarial consultant Watson Wyatt reveal that in 1993, the average fund generated returns of 54.1 per cent while HSBC Asset Management generated a return of 42.8 per cent. While this is by no means bad, it did not compare favourably with houses such as Jardine's which turned in returns of over 70 per cent in the same year. A similar report compiled by fellow actuarial consultant William Mercer this time last year revealed that HSBC Asset Management ranked last out of 17 managers over the past five years, 19th out of 21 over three years and 23rd out of 24 over one year. However, the latest Wyatt figures reveal that its investment performance is improving. In 1994, the HSBC median outpaced the Wyatt median and in the year to date in 1995, it is once again outpacing the average. This is a significant turnaround. The consensus of opinion within the industry is that HSBC Asset Management is close to getting itself sorted out. It has changed its investment philosophy to become more aggressive and the latest moves should, hopefully, be the beginning of the end of the past eight years of restructuring. But the fact remains that business no longer comes knocking at HSBC's door to the same extent as it once did. These days, it is going to have to go out there and pitch along with everyone else. Nevertheless, it has a number of advantages, namely improved performance, a rationalised corporate structure and, as ever, the four letters at the beginning of its name.