Robert Morse, former CEO of Citi's Asia-Pacific institutional clients group (ICG), announced at the AsianInvestor/FinanceAsia Distressed & Troubled Asset Investing Summit yesterday that he is launching a multi-billion dollar global financial services firm called Primus Financial Holdings.
Morse will lead the management team alongside Huan Guocang, currently chief executive officer of Primus Pacific Partners, a Hong Kong-based private equity firm, and Ng Wing-Fai, currently a managing partner with Primus Pacific Partners.
Huan and Morse will share the chairman position, while Morse and Ng will be co-chief executive officers.
Primus Financial starts out with initial permanent capital of $1 billion, apparently from one ultra-high-net-worth investor, giving the management team ample breathing room to raise additional funds. The management team plans to build a financial services institution encompassing insurance, banking, brokerage, advisory and wealth management services.
The firm will also manage an alternative investments platform with an initial focus on financial assets in the US (including distressed fixed income) and private equity in emerging markets.
It's clear that more former investment bankers are trying to launch their own funds or set up boutiques rather than re-enter the market at another behemoth firm. In Morse's case, you could say he's "been there and done that" when it comes to big-firm banking. He resigned from Citi last August after 23 years with the firm.
As CEO of Citi's Asia-Pacific ICG from 2004 to 2007, he was instrumental in increasing institutional revenue by 90% to $6.5 billion from $3.4 billion. He expanded the business throughout Asia, including buying control of Guangdong Development Bank in China for $3.1 billion in 2006, and scoring high-profile roles for Citi on the IPOs for China Citic Bank, China Coal and China Railway Construction. Morse also oversaw the move to take over Taiwan's Bank of Overseas Chinese for about $426 million and launched commercial banking in Indonesia, a prime brokerage office in Singapore, and investment banking in Bangladesh.
Before moving to the Asia post in 2004, Morse, 53, was head of global investment banking at Citi. He joined Citi when the firm acquired Salomon Smith Barney, the investment bank he had worked at since 1985.
Indeed, Huan, Morse, and Ng were colleagues at Salomon Smith Barney and Citi in Hong Kong during the 1990s. Huan and Ng then co-founded Primus Pacific Partners, which is a fund focused on financial services that has recently made investments into this industry in China, Hong Kong and Malaysia.
"We are delighted to launch an exciting new strategic player to the marketplace with significant capital, deep operational experience, and long-term financial capabilities," says Huan in a press release. "We are uniquely positioned to operate with complete flexibility to focus on the many investment opportunities that exist today."
They say their strategy will be to acquire, integrate and grow an Asia-based financial services firm. Morse adds in the release: "We plan to construct a platform of banking and insurance companies across the globe. Our partners are investment professionals who, through their decades of successful investment and operational experience, helped lay the building blocks of several prominent financial institutions. Primus Financial will be able to leverage the experience, relationships and track-record that the team built up while leading these companies."
At the conference, Morse told FinanceAsia that opportunities to buy operations such as AIA's Asian life insurance business, which failed in the auction process because bid prices were so low as to be unacceptable, represent the sort of high-quality businesses that are on the block for the right buyer. He stressed that key to making this business work, though, is the operational experience he and his colleagues bring to bear.
When asked why he's even getting back into the game -- why not retire and spend more time doing yoga? -- he laughed that his time off "was admittedly shorter than I anticipated" but then went on to say that getting a chance to buy financial institutions at the prices they are available now is a "once-in-a-generation opportunity".
Indeed, the "once-in-a-generation" opportunity is clearly something that Morse has been thinking about for some time (perhaps during his nine months off?). As a keynote speaker at the conference he outlined distressed assets in today's market that are, in his opinion, "simply mispriced, caught up in the financial tsunami and trading at levels significantly below their intrinsic value". He said such mispriced assets come in many forms, but itemised four categories worth looking at, many of which offer investors a "once-in-a-generation" entry point of ownership.
The four categories are:
- Loans and bonds of healthy, well-managed companies that have capital structure issues, refinancing risk, over-reliance on short-term debt andleverage issues.
- Divestitures of assets that are valuable and productive but non-core.When capital needs force divestitures, price is secondary.
- Capital raising transactions forced on companies by their lenders, regulators or other constituencies in a capital-constrained environment.
- Government-owned or nationalised entities selling assets to repay government loans and other support.
"Of course, given market volatility and the highly uncertain shape and timing of a global economic recovery -- when a recovery will ensue, will it be V shaped, U shaped, W shaped, L shaped or are we at the beginning of protracted low or negative growth (the "D" word)? -- timing, structure and risk management of an investment is critical and should shape all investment decisions," he warned.
Watch this space to see if their timing, structure and risk management hit the mark.