TEN senior executives of the WM Company have defected to HSBC to set up a rival operation in Edinburgh which could create 400 jobs within four years.

HSBC Fund Administration Services will employ 20 by the end of the year and launch an investment administration and performance measurement service next year, backed by HSBC but run as an autonomous company from Edinburgh.

Stewart Crawford, who left WM earlier this year, has now been joined by WM's former head of investment management, Mike Martin, and three other key department heads: the finance director Jim Phillips, Ian Stephenson the head of outsourced administration, and Colin Kay, head of global performance. Several of the ten defectors have yet to leave WM.

Crawford and Martin are running the start-up operation from a corner of Midland Bank's call centre at Edinburgh Park. They expect to build the operation to between 300 and 400 people in three to four years.

Martin said: ''We have consistently been given the message over the past couple of years that there isn't enough quality competition in these markets. There are tremendous opportunities to build a business from scratch starting with a blank sheet of paper.''

The move towards outsourcing of fund managers' administration has slowed, with few new mandates announced by the major players, who say managers are preoccupied with millennium and Emu worries.

But Martin said: ''We are still seeing a high level of interest.''

In performance measurement, the new group intends to develop new products in areas such as risk analysis, in response to market demand.

WM meanwhile is gearing up to meet the challenge. It is now just one part of a Bankers Trust operation in Edinburgh which finds itself one of the capital's top 30 employers, with 920 people, and BT's third-largest centre outside the US. Bill Thomas, managing director of WM, was in Edinburgh this week to rally the troops.

On Bankers Trust's influence and control, he says all the Edinburgh arms will benefit from being part of a global organisation. BT first bought Alex Brown with its 1000 staff to add fund-raising capability for mid-cap companies; then in building up its pan-European stockbroking, BT reunited two former arms of NatWest in buying NatWest Securities in Edinburgh. The new BT Alex Brown has 65 people in Edinburgh, including three of the top-rated investment analysts in the market, alongside Wood Mackenzie Consultants, which offers a specialist service in energy, chemicals and pharmaceuticals and has the top 10 blue-chips in each of those sectors as clients.

Thomas, who has taken a lead role in repositioning and growing a variety of segments of the bank since arriving at BT in 1990, says he expects ''quite significant growth'' in WM which employs 600 in Edinburgh. On new jobs, he adds: ''I would like to think we can take on more clients. We want to make use of BT's 90 offices in 50 countries .''

In investment administration he believes there will be a global trend towards outsourcing, but sees ''a bit of a hiatus in the market as clients are a bit reluctant to move in advance of year 2000'', and are also grappling with EMU.

On performance measurement he says BT has invested in upgrading WM's systems and the investment is now showing through. New risk analysis tools are in the pipeline, with an eye on the retail market, drawing on bigger universes of data.

Ian Blackford, managing director of BT Alex Brown, says the brokerage founded 150 years ago as Wood Mackenzie has been strengthened by BT's global position.

''BT is prepared to commit capital to build the business. They are certainly encouraging us to become not just a leading player in the UK but in Europe. We have an opportunity to become in Edinburgh part of one of the three or four leading players in global equities.''

Paul Gregory, managing director of Wood Mackenzie Consultants which has 120 staff in Edinburgh and offices in London, Houston and Moscow, says being part of an investment now makes sense, as BT is able to open doors in boardrooms across Europe, and to come in behind a consultancy team with specialist merger and acquisition teams where required by the client.