Credit Suisse: What's in Store for Asset Management

With the bank’s strategy set for its main wealth management and investment banking divisions, focus has now shifted to the far smaller asset management unit. Will calm descend with its organizational shuffle?

It made 61 million Swiss francs in the second quarter: Credit Suisse’s asset management unit is a minnow when compared with the private bank, which it was merged into four years ago.

But the unit has also been beset by a series of reorganizations, prominent exits, and changes in leadership since the merger.

In May, former investment banking head Eric Varvel was brought back in to run it after Bob Jain left for Millenium, a New York-based hedge fund. And Varvel has wasted little time shuffling the management team to better suit his strategy.

Specialized, Not Supermarket

He nominated Michel Degen to replace Michael Strobaek as head of Switzerland. Strobaek, who is also the bank's chief investment officer and head of a products and solutions link-up with the private bank, had held a dual role previously.

Bright spots are an index-solutions business and a real estate arm, one of the unit’s most profitable, reflecting the bank's pursuit of a specialized strategy instead of a supermarket one. 

Credit Suisse sold its funds business to U.K. firm Aberdeen Fund Management in 2008. Its ETF business went to BlackRock three years ago.

Deutsche's Declaration

Credit Suisse has also used targeted deals such as 2010’s purchase of York Capital in 2010 to bulk up in strategic areas such as hedge funds – also a focus area for UBS under former O'Conner executive Bill Ferri.

Deutsche’s asset management division, which made 171 million euros in second-quarter pre-tax profit, has also been the subject of rampant speculation recently.

CEO John Cryan was forced to use a regular message to staff to make it «unambiguously clear» that asset management would not be disposed of to bolster capital. 

Sticking With Asset Management?

The picture is similar for Credit Suisse, though the Swiss bank doesn't declare its commitment to asset management as unambiguously as the German bank does.

Nevertheless, Credit Suisse’s changes reflect a similar push, with Varvel saying his ambition is to «grow our business globally in a disciplined manner and become a leading global asset manager.»

The asset management sector is grappling with historically low investment returns due to negative interest rates, sinking margins, and a risk-shy clientele which are increasingly seeking out passive funds over more lucrative active ones.

Degen's Plans

In Switzerland, the bank is taking a more regionalized approach under Degen, which is expected to break up boutiques and fiefdoms like alternative investments in favor of centralizing and cost-cutting.

Credit Suisse is behind market leader UBS in Switzerland, which is using a hedge fund diversification strategy as part of a plan to widen its market share. 

Degen has been lauded for growing the unit’s fixed income products in Asia, and he is expected to streamline Credit Suisse’s product offerings, while introducing new ones – much like his foray into Asia with fixed income products.

Fight His Corner

He is also expected to fight his corner with two powerful factions within Credit Suisse – the corporate and institutional clients unit, which effectively owns the customer relationship, and sales and trading, which carries out the unit’s orders.

With Degen expected to shake up the Swiss unit before unveiling a detailed strategy, Credit Suisse’s asset management is set to remain a construction site for the foreseeable future.

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