Successfully blending two cultures

Banque Syz & Co is tucked into a row of shops including Cartier, Bulgari and Patek Philippe, selling Swiss and foreign luxury goods on Geneva’s Rue du Rhône. But despite boasting neighbours with such established, world-famous reputations, the Syz bankers are still new kids on the block, having set up shop only in 1996. And by taking staff and customers from bigger, well-established rivals, they have ruffled feathers of the lakeside City’s longer-term financial residents. “In Geneva, we have some very good friends and also some enemies,” confirms Alfredo Piacentini, a co-founder of the bank who has seen staff numbers swell from 10 to 350 in the last 13 years. “But this is normal, as it is not easy to arrive as a new actor in an absolutely conservative world.” A refugee from Lombard Odier, where he worked as a financial analyst, Mr Piacentini’s mission is to provide private clients with institutional quality asset management. In the past he has often been critical of sub-standard fodder available in Geneva.“Private banking has always been more emotional,” smiles Mr Piacentini, whose bank manages assets of SFr24bn (E16bn). “It was based on what people thought about the strength of the dollar or the speed of the wind. Our intention was to import institutional technology…delivering better performance through an innovative, discip-lined approach based on macro-economics and research.” The other key innovation was the early introduction by Banque Syz of performance fees. Until this happened, the wealth management industry had become complacent through raking in regular asset fees just for standing still. More recently, clients’ accounts at larger institutions have been plundered by bankers selling them inappropriate, ineffective, structured products. So far, Syz has managed to avoid this factory, production-led mentality, although it will be a challenge to preserve its small-group culture. “The more you grow, the more difficult it is to adapt your structure to private clients and maintain flexibility,” admits Mr Piacentini. “The bigger you are, the more difficult it is to be tailor-made and to give freedom to private bankers.” The irony is that Mr Piacentini is both a fan and a critic of the factory system, which can dominate banks such as UBS and Credit Suisse. While appreciating the independent and maverick culture of a small institution, he is a strong believer in a systematic approach, and has little sympathy for client advisers who go off-piste. “We are not hiring private bankers and leaving them to do what they want, as other are,” claims Mr Piacentini, with a hint of steel entering his otherwise relaxed exterior. “All private bankers who come here need to subscribe to our philosophy and operate our type of asset management.” With this blend of systems and entrepreneurship, brought together by the performance-led remuneration structure, he has had no trouble attracting top-notch talent. In 2007 he lured cerebral Scotsman Alan Mudie, a highly experienced business and fund selection specialist from BNP Paribas, to become chief executive of Oyster, the bank’s flagship fund of funds business. Staff such as Claire Locher - a charming ex-Pictet fund sales operator, with good connections in all European capitals - have also been added to the team. “Maybe eight years ago, these people would have looked at us and said: ‘You are a small boutique; we will think about it.’ But success attracts success, and people want to be in the winning car,” says Mr Piacentini. “We attract people who are sometimes disappointed with the personal leverage they have elsewhere. These are more entrepreneurial people, who want to paid for the results they bring.” Growth set to slow But the market has turned quickly, and while reluctant to make any forecasts, in the potential presence of “too many fireballs,” Mr Piacentini says it will be difficult to grow funds and earnings from asset management in the current climate. “Through the last five or six years, we have grown 30 per cent in earnings every year and have been very visible. We believed this was sustainable. But with the crisis, for the next two years, we cannot imagine that we can grow at the same level.” Globally, the private banking operation, accounting for 73 per cent of the bank’s assets, which has made particularly strong inroads in discretionary wealth management in Italy, can still grow. It is also well-established in Austria and Luxembourg, but has targeted Spain, Belgium, Scandinavia and the UK for future expansion. But assets in the heavily equity-biased Oyster funds, which have fallen 60 per cent in 2008 from E6bn to E2.4bn.due to the market crash and redemptions, may fall further. The concept, structured through a Luxembourg-domiciled umbrella fund, was very innovative when launched in 1996, but is now being followed by many competitors. Core asset classes, such as European and global equities, bonds and balanced funds, are managed in-house. Others are sub-contracted to selected external houses, including New York-based emerging market house Artisan Partners, Italian equity manager Ifigest in Milan and Japanese equity specialist Moran Wright in London. The bank generally avoids competitors in its fund range and is more likely to choose smaller players than household names. Despite the heavy asset losses, relative performance has been respectable. Open architecture – originally touted by larger Swiss banks – does not find favour with Mr Piacentini. “We don’t like it,” says Mr Piacentini, referring to the model where banks sell each other’s funds to clients. “At the beginning, open architecture was never a gift from a bank to a client because they are all nice guys. It basically came about because some big banks realised that by selling just their own funds, they are losing part of their clientele who want to buy other, sometimes better funds.” The system has been exploited by the self-serving banks, who in exchange for opening their platforms to the competition, recover rebates from sales charges for the funds. “If one of our clients want to buy a fund from another company, I buy it for them, or we can scout ten funds and choose which one is best. But our advice is not done at the level of a fund itself, but at the level of the fund manager.” While Syz’s pure private banking business involves the selection of funds, stocks and bonds for private clients, Mr Piacentini prefers to set up a dedicated fund and foster a deeper, mutually beneficial relationship with the external fund managers. “I could propose a fund of Moran Wright to our private clients,” he says. “But it is better to set up an Oyster fund, within my guidelines, with my controlled risk and daily liquidity and ask them to manage it for me. The cost to the client is exactly the same and we share the asset management fees with Moran Wright.” Syz has seen fewer redemptions from its E1.9bn 3A fund of hedge funds products, supervised by Mr Piacentini’s fellow founding partner Eric Syz, despite 15 per cent losses due to negative performance. The bank has decided not to gate its funds, and to try and keep clients invested through regular conversations. None of the umbrella vehicles run by Syz have any exposure to Madoff funds, though the bank admits a “very limited amount” of rogue products slipped under the radar into private clients’ portfolios. In fact most of the work currently being done by the bank’s client advisers is about reassurance and encouraging customers to stay invested rather than proposing new investments. “It’s very difficult to sell actively managed products,” says Mr Piacentini. “Private clients are horrified by the performance of equity markets and bonds. We are clearly in a phase of maintenance, where our salesmen are touring around Europe to explain performances and keeping clients informed. This is an investment for the future, as it is import-ant to remind people that you were there when the market was bad and you will still be there when it turns the corner.” Yet 30 per cent of the board’s time is spent brainstorming, to locate new asset classes, products and geographical opportunities. One such project is Ora Capital, a recently aquired seven-strong team, now renamed 3A Asia, managing an Asian fund and distributing other products in the region. “We believe that over time, there is a lot of opportunity here in Europe and that we can gain market share,” he says. “But Asian markets are growing very fast and we believe that we had to be there, but prefer to start with a small structure and a small investment to test the market. We will see what the reaction is before we enter with a bigger investment.”