CSAM cedes control to fund specialists
Yuri Bender examines the reasons behind the exit of top executives at CSAM. Credit Suisse’s grand experiment in integrating asset management, private client services and investment banking appears to have been cut short. The recent departure of Jeff Peek, vice chairman of Credit Suisse First Boston (CSFB), has left Credit Suisse Asset Management (CSAM), the group’s e280bn funds arm, back in the hands of investment managers rather than investment bankers. When Mr Peek was recruited from Merrill Lynch by CSFB boss John Mack at the beginning of 2002, a new financial services division was created especially for him. This encompassed CSAM, transaction processing business Pershing and a wealth management arm, Private Client Services, targeted at high net worth investment banking contacts. Following the sale of Pershing and the integration of wealth management into Credit Suisse Private Banking, Mr Peek’s role was looking more and more threadbare. Pershing alone accounted for 40 per cent of revenues in 2001. Bottom line Mr Peek was always seen as an investment banker. He believed CSAM was only worth anything if it could contribute 20 per cent to the CSFB bottom line. “The reason for having CSAM in CSFB is to iron out the volatilities in the investment banking business,” he recently told PWM. With Pershing gone, Mr Peek saw the only way of increasing the efficiency of his division would be through cost cuts. The private client business was transferred to become the responsibility of the private bank in Europe because there was potential for confusion. Wealthy individuals complained they were sometimes cold-called by two different branches of the Credit Suisse group, which had little knowledge of each other. Now that Mr Peek has moved on to head up the CIT consumer finance group, CSAM can go back to its roots, believes vice chairman Bob Parker, who founded the company in 1982. “The best investment management firms are driven by investment management professionals,” said Mr Parker. “That’s what we had in the early 90s and 80s.” Rather than dampening investment banking volatility, the aim of asset management, believes Mr Parker, is to add value for clients. Parker: founded company in 1982 Two jobs But Mr Parker also has his work cut out. He is currently doing two jobs, after the departure of Henry Wegmann, chief executive officer of CSAM for Europe. The official line is that Mr Wegmann left because he did not agree with CSAM’s matrix management system, which dictated that centralised functions such as equity or bond management should always take precedence over regional marketing and product development teams. But several other differences are coming to light. Swiss-born Mr Wegmann was concentrating on selling products to the internal private bank, believing that open architecture had peaked in Europe, and external funds would never make up more than 12 per cent of retail banks’ distribution lists. Mr Parker disagrees, pointing out that only $50bn of CSAM’s assets are internally sourced. “In the future insurance companies and other third party distributors will stick to distribution and outsource asset management,” said Mr Parker. “Today, open architecture is much talked about and not much observed. I think in the future it will accelerate, not decelerate.” Mr Wegmann also believed CSAM clients were overweight in bonds, which do not create enough revenue for the group. Mr Parker, on the other hand, wants to boost fixed income business. Wegmann: disagreed with strategy Speaking before flying from London to Zurich for the third full-scale review of the business in the last 18 months, Mr Parker said there would be a focus on core products of equities, bonds and balanced funds for both retail and institutional clients, who would be treated equally whether in the group or outside it.
