Credit Suisse: U.S. Investors Take an Interest in Switzerland's No. 2

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A second U.S.-based asset manager has increased its stake in Credit Suisse, following the lead taken by Harris Associates. Is this the beginning of a trend?

Credit Suisse (CS), Switzerland's No. 2 after UBS, has not had an easy ride as of lately. Despite massive job cuts and cost reductions, it barely reached profitability in the second quarter.

No wonder has the price of the stock dropped as much as it did: minus 40 percent since the beginning of 2016. It reached a record low of 9.76 francs in early July and has since recovered some ground, reaching 12.30 francs recently.

Not One for Short-Term Investments

The equity may seem cheap by comparison and has attracted a further, well known investor: Capital Group. The Los Angeles-based asset manager increased its stake to 5.05 percent from a previous 3 percent, according to information by SIX Swiss Exchange and a report by «Reuters».

Capital Group isn't known to bank on short-term shifts of prices, and has its eye set on long-term investments. To reduce the decision to increase the stake may therefore have other reasons than just the – comparatively – low stock price.

Investors Are Taking Heart

In a benign interpretation of the move, CS CEO Tidjane Thiam may see the decision as a sign of trust in his sweeping changes at the Zurich-based bank, changes that earned him criticism both in Switzerland and at the investment bank in New York.

The first half of 2016 showed that Capital Group may not be the only investor to have taken heart: CS had significantly more new money flowing in that before and the International Wealth Management unit of Iqbal Khan in particular had a strong showing.

Experienced Investor

With Capital Group, Thiam now has a second U.S. investor seemingly supporting the strategy chosen. Harris Associates, a daughter of Natixis, has already boosted its stake to more than 10 percent, making it the second-biggest investor after the state fund of Qatar.

Capital Group, founded in 1931, has client assets totaling $1.4 trillion. It has branches in Zurich and Geneva and 150 employees in Switzerland. Capital Group also has stakes in Swiss companies Sonova, Syngenta, Meyer Burger and Kuehne+Nagel.

Switzerland Remains Important Market

Luis Freitas de Oliveira, the chairman of Capital International, last year said that Switzerland was a core market for the company, which had been the first U.S. asset manager to open a branch in the country.

In Geneva, Capital Group in 1968 developed the first international stock indexes for countries outside the U.S., the MSCI indexes of today. Many business strategies are still developed from Switzerland and numerous core business activities in Europe are managed from the small country with the big financial market: asset management, research, fund management, human resource management, legal affairs, finances, IT, distribution and marketing are based in Switzerland.

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