UPDATE 2-Waddell & Reed names chief investor for two units

Mon Aug 16, 2010 6:13pm EDT

* Move also boosts company president Michael Avery

* Company cites "succession planning" efforts

* Firm scrutinized in "flash crash" in May (Adds details on succession planning; analyst's comment)

BOSTON, Aug 16 (Reuters) - Asset manager Waddell & Reed Financial Inc (WDR.N) on Monday named Philip Sanders as chief investment officer of two investment subsidiaries, a move that also positions its fund manager Michael Avery to eventually take over the company.

Sanders, 50, will report to Avery, who is 56 and was named president of the Overland Park, Kansas-based financial company in January. Avery also will remain co-portfolio manager of Waddell & Reed's Ivy Asset Strategy fund, while Sanders will still co-manage the company's large-cap growth products.

Waddell & Reed, and Avery's fund within it, drew attention this spring after reviewers identified it as a large seller of futures contracts on May 6, when equity markets briefly tumbled, then recovered -- the "flash crash."

There has been no suggestion that the fund or firm was at fault. But the publicity did not help. The fund posted net outflows for May and June, a period when its performance also lagged that of peers, though it has since bounced back.

Company executives were not immediately available to comment on the announcement of Sanders' new role.

But in the news release Waddell & Reed Chief Executive Henry Herrmann called the personnel shift "another move in support of the company's longer-term succession planning efforts." He said Sander's appointment will enable Avery to focus on both his funds "and his expanding executive duties."

Sandler O'Neill analyst Michael Kim said that language and Avery's background suggest he has the inside track to succeed Herrmann.

"This move is really about succession planning. I wouldn't read anything into it as far as performance issues or concerns," Kim said.

Sanders has been with Waddell & Reed 12 years, the company said. He will be chief investment officer of Waddell & Reed Investment Management Co, the investment adviser to Waddell & Reed mutual funds, and of Ivy Investment Management Co, the investment adviser to Ivy funds.

Though of modest size among competitors with $68 billion in assets under management, Waddell & Reed has grown in recent years, particularly on the performance of Ivy Asset Strategy. (Reporting by Ross Kerber. Editing by Robert MacMillan, Gary Hill, Leslie Gevirtz)

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