Aberdeen boosts fixed income via Credit Suisse intake
Aberdeen Asset Management has completed the final closing of its acquisition of Credit Suisse's Global Investors traditional asset management business. This covers the European, Japanese and US businesses acquired by Aberdeen form Credit Suisse, and follows the first closing of the Asia Pacific ex-Japan transaction in May.
In Asia-Pacific, Aberdeen has spent the past two months integrating Credit Suisse's asset managers with its own team. The fund managers and other investment professionals that have joined Aberdeen from Credit Suisse have been fixed-income specialists and have involved movements mainly in Australia. One ex-Credit Suisse manager has been added to Aberdeen's Singapore team and no one has thus far joined the fund house's Tokyo team.
"In the region, we have been busy integrating the people side of the business," says Hugh Young, regional managing director of Aberdeen Asset Management Asia and overall group head of equities. "The theory behind the acquisition was to take the revenues but to cut the costs."
Pre-Credit Suisse, Aberdeen had a staff count of roughly 300 in Asia-Pacific including Japan. Young expects that figure to rise to roughly around 350 following the integration with Credit Suisse.
Around an additional £29.1 billion in assets will now transfer over to Aberdeen, following the £7.4 billion which transitioned following the first closing. The acquisition makes UK-listed Aberdeen one of the largest standalone asset management groups headquartered in the Europe.
The integration is complementary on the asset gathering side because the bulk of Aberdeen's assets are sourced outside of Asia while the bulk of the assets Credit Suisse has brought into this deal are sourced from Asia, says Young. Post-Credit Suisse, Aberdeen is expected to manage around $37 billion in investments in Asia-Pacific.
Impact on investment management
Worldwide, around 120 former Credit Suisse employees, including some investment managers and distribution staff, are joining Aberdeen "long-term", including Paul Griffiths, who will continue in his current role as global head of fixed income. Aberdeen's fixed-income teams continue to be headed by Bill Bovington in Sydney and Anthony Michael in Singapore, both of whom will report to Griffiths.
On the equity side, Aberdeen's long-term investment process -- for which it is known for in Asia -- remains unchanged and will continue to fall under the leadership of Young from his office in Singapore.
There are other Credit Suisse staff that are expected to continue to be employed as part of the integration and transition, likely for around a three-month period. Young was not able to place a figure on the number of Credit Suisse staff who will be around in the "short-term".
On the investment management side, the integration has been "relatively straightforward" precisely because Aberdeen's equities team has remained intact, while the addition to the fixed-income team has been mainly in Australia.
"After the merger, the equity side will be run the Aberdeen way. On the fixed-income side, there will be more of a merger. Both investment teams will be merged, but that's really more in Australia," Young says.
In Asia, from now until the end of the year, there is still a lot of integration that needs to take place in terms of logistics, back office systems, and administration. Infrastructure-wise, there won't be much change except in Tokyo, where the office needs to relocate due to space constraints.
Benefits from integration
Meanwhile, Aberdeen cites access to the Credit Suisse private banking network as one of the benefits of the acquisition, with private bank clients forming a large percentage of the ownership of transferring funds. At a geographical level, Aberdeen will expand its European operations in London, Paris, Frankfurt and Zurich, in addition to new offices in Budapest, Geneva and Milan. Elsewhere, it adds scale to Aberdeen's presence in Australia's wholesale market. In Japan, the addition of retail funds provides access to new clients. In the US, the group's open-end and closed-end fund offerings are widened.
Another major attraction is the underlying complexion of funds. Many of these are money market funds and specialist fixed-income funds; areas where Aberdeen lacked scale before. Some 192 equity, fixed-income and money market pooled funds will now come under the management of Aberdeen's highly regarded investment management teams around the world. Of these, 48 are domiciled in Luxembourg and registered for sale in up to 27 countries.
Credit Suisse also brings an index-linked investment team to Aberdeen that Hugh says is the "kind of skill we never had before".
The acquisition further strengthens Aberdeen's balance sheet at a time when increased importance is being attached to the financial stability and sustainability of asset management groups. It is being financed through the issue of new equity and Credit Suisse now becomes Aberdeen's largest shareholder with 23.9% of the total share capital.
Having Credit Suisse as a strategic shareholder is expected to benefit Aberdeen as well. Credit Suisse already distributed some Aberdeen products to its private-banking clients even before this deal took place, and Aberdeen hopes to continue to build on this relationship.
This isn't Aberdeen's first acquisition. In July 2005, Aberdeen acquired the UK-based asset management business of Deutsche Bank, including global equities managed in London and fixed income managed in Philadelphia. At a stroke it tripled its assets under management, but not a single fund manager from Deutsche is with the firm today.
For Credit Suisse, the close of this transaction marks s step forward in its strategy of focusing its resources on alternatives, asset allocation/Multi Asset Class Solutions (MACS) and Swiss businesses.