Overhaul of Credit Suisse AM raises questions

The bank is switching its funds business from a standalone distribution model to one that relies on its private bank, with sales heads exiting. But will it regret cutting back in Asia?
Overhaul of Credit Suisse AM raises questions

Credit Suisse’s move to fold its funds arm into its private bank is seen as a logical step to reduce costs, but means it is cutting staff in its Asia AM unit at a time when other firms are ramping up in the region.

The creation of the integrated wealth management unit – to be run in Asia-Pacific by Francesco de Ferrari, previously regional head of private banking – will take place as part of the group reorganisation announced last week.

The move has resulted in the recent departure of several regional heads of asset management distribution, in what was a widely anticipated move internally, say sources, who add that the process was handled well by Credit Suisse.

Those who have left the AM unit include Will Britten, Sydney-based head of Australia and Asia-Pacific distribution; Chris Faddy, head of non-Japan Asia distribution; and Stuart Guinness, head of emerging market products for Asia-Pacific.  

Singapore-based Faddy had been with the firm for about six months, having moved from Barclays’ funds business in the Lion City. Guinness, also based in Singapore, joined last year from Société Générale. Britten left about two months ago, and Matt Perrignon, Australia head of pensions coverage, is now head of Australia (but not Asia-Pacific distribution).

Effectively, one layer of management – for regional distribution – has been removed, but the investment teams and their reporting lines remain unchanged. The group is expected to continue catering to institutional clients via its sales teams.

Estimates suggest about 100 staff have been cut worldwide from the group in the past few months, with around 10 of those departures coming in Asia, say recruiters. Another round of departures is expected in February, once existing projects have been completed.

Nothing has changed from a product perspective, say sources, aside from recently announced plans to sell its exchange-traded funds, private equity fund of funds and PE secondaries units. Nor have major cuts been made to its sales teams (aside from the regional heads), investments or operations.

What is unclear is the fate of Neil Harvey, head of the Asia-Pacific AM business, and other senior staff such as Joseph Ho, Asia-Pacific head of ETFs. They are still with Credit Suisse, but events within the firm are “a moving feast right now”, says a source.

Hong Kong-based Harvey – who has strong investment banking and AM experience – is said to be in talks about a new role in the group, which he rejoined in February 2010. In addition to the regional AM business, he had run the emerging markets business globally. There are two other AM businesses, traditional/long-only (or 'core') and alternative investments.

The EM vertical business has been folded into alternatives under Bob Jain, until recently head of equities for the investment bank. The long-only division will continue to be run by Gerhard Fusenig out of Zurich. Jain and Fusenig report to Robert Shafir, New York-based CEO of asset management and also CEO of Credit Suisse for the Americas.

Ho’s position is uncertain in light of Credit Suisse’s announcement last month that it will sell its ETF business. He may move with the unit, depending on which firm buys it.

The bulk of sales staff remain in markets including China, Japan, South Korea and Southeast Asia, although a few individuals are understood to have been cut in Australia and Japan.

In Tokyo, Akira Takahashi remains head of the business. His team, now 18-strong, had already been pared back a little this year, largely due to a planned reduction in the product offering given the sale of the ETF and PE units.

According to its third-quarter results, Credit Suisse, like arch-rival UBS, is under pressure to meet statutory capital requirements and satisfy shareholder demands for return-on-equity targets.

But some feel Credit Suisse is making a mistake by cutting more staff in Asia and may come to regret it, given it's the fastest growing region for the firm’s business.

One source says the cutback is at odds with an increase in commitment by several established players in the region and the recent arrival of new entrants who see Asia as a key growth market.

The group's AM business has chiefly been a service provided to its private clients rather than a standalone business – and that will increasingly become the focus. But this approach may not help the firm in terms of its institutional business, some suggest.

“The institutional-quality product comes out of New York,” says a source, and the teams there have been told to start using the investment bank to build relationships with key clients in Asia. They are likely to have more success doing so than the Zurich-based staff, whose focus is on managing discretionary accounts that come through the private bank channel, argue some.

Ultimately, things remain up in the air. While a decision has been made on overall structure, how exactly the bank will implement that is a work in progress. “They are still working out where there are duplications in other businesses and where cost synergies can be made,” says a source.

The restructuring is the second major change to Credit Suisse’s asset management unit in recent years, following the sale of its traditional long-only business to Aberdeen Asset Management in 2008.

Credit Suisse declined to comment for this article.

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