Parker draws up three-point plan for CSAM

Following recent, high-profile management changes, three fast growing business areas have been prioritised by the global executive committee of Credit Suisse Asset Management (CSAM), which includes chief executive Michael Kenneally, Swiss boss Mario Seris, and vice chairman Bob Parker, who founded the company back in 1982.

All three growth lines have been incorporated into Brady Dougan’s plan to grow asset management and alternatives. Mr Dougan succeeded John Mack as head of CSAM’s parent company, Credit Suisse First Boston (CSFB).

• White labelling through post offices has been identified as one of Europe’s fastest growth areas. CSAM manages E6.8bn for the Italian post office and also distributes and manages funds for Deutsche Post.
• Personal pensions will be targeted as a much more important component of long-term savings growth than the corporate or state sectors.
• Life insurance companies distributing third party products and outsourcing the management of their own life insurance book are seen as the third key target.

This concentration on third party distributors, while not marking a complete sea-change, signals at least a slight deviation from past practice of pushing as much product as possible through internal channels.

Lack of synergy with asset management led to CSFB’s disposal of financial services outsourcing subsidiary Pershing last year. And Churchill was sold on by Winterthur, the group’s insurance arm. “We had discussions on pumping out mutual funds through their network, but frankly it didn’t work out,” reveals Mr Parker.

Internal channel

Of course there is one internal distribution channel which remains sacrosanct. CSAM currently manages $50bn (E41bn) for its Credit Suisse Private Banking affiliate. “We would like to manage a much greater chunk,” admits Mr Parker. “But we need a diversified client base. I would be very worried indeed if we had too much reliance on one client or sector of clients.”

Rather than treating it as a guaranteed source of product placement for wealthy clients, Mr Parker has identified an even more valuable role for the Zurich-based private bank. “We are working very closely with them on product development, and use them as a sounding board, whether they can see any future demand for a product. In today’s business climate, clients are becoming more intolerant of managers who underperform, or create product just to sell it, irrespective of what the customer wants.”

Despite the fact that CSFB head Mr Dougan must now report directly to group head Oswald Gruebel, who is also responsible for private and retail banking and insurance, there is a determination to keep the Private Banking arm separate from CSFB. Competitors including Société Générale and Merrill Lynch prefer to integrate funds and private banking.

Separation of the two arms, both making their living from wealth management, is driven by open architecture distribution, according to Mr Parker.

“Credit Suisse Private Banking was one of the first areas to adopt open architecture,” he says. “Their clients can buy CSAM funds, Fidelity or Franklin Templeton in any branch. Private Banking is a client of ours, but we have to fight for their business. If you put CSAM into Private Banking, that would immediately cause conflict with the open architecture philosophy, which has been so beneficial for the entire group.”

According to Mr Parker, distributors, both external and internal, are currently demanding three product solutions:

• Total and absolute return products; CSAM’s Luxembourg-based total return fund was only launched in March last year, but already holds E2bn.
• Dynamic asset allocation, rather than old-style static balanced products are slowly coming in to favour.
• Clients are moving away from enhanced indexing and low-risk bonds straight to high alpha products including emerging markets, mid-caps and commodities.

Demand for high alpha

Fixed income allocations – a historical strength at CSAM – are coming out of government bonds and switching into high yield, emerging debt and convertibles, says Mr Parker. “There is a huge demand for convertibles, particularly from insurance companies, which want to offer equity-like exposure, where regulators don’t allow them to hold equities. Clearly, we are not going to give up on our core equity or core fixed income products, but the new demand is for high alpha.”

Part of the new focus, coming from group level management, is a greater concentration on alternative asset classes, which promise the potential of outperformance and higher fees. “This business is absolutely critical to us,” says Mr Parker. The new alternatives division, encompassing private equity, hedge funds and funds of funds comes under Bennett Goodman. But Mr Parker will be involved in joint marketing efforts utilising the strengths of both departments.

“CSAM aims to be a multi-product firm, so we are working closely with the alternatives division,” he adds. “This involves product development and there are also synergies in operations and back office platforms. At the end of the day, you don’t want everyone running their own back office.”

Parker: Private Banking affiliate a useful sounding board for future products