It is fair to say I have been particularly outspoken in my criticism of the debacle at Credit Suisse. During my 23 years in financial services, I have never seen a group of Credit Suisse’s stature implode quite so spectacularly. The failure of upper management to understand the UK retail market and take heed of advice from their extremely able people on the ground was remarkable. However, that is all in the past and it seems that some common sense is being applied.
The loss of multi-managers Gary Potter and Rob Burdett was probably the last straw for many people. However, Credit Suisse has addressed the problem quickly by hiring Aidan Kearney and Graham Duce. They join Rob Bowie and Scott Spencer (the sole survivor from the old team) to run Credit Suisse’s range of multi-manager funds.
I have known Duce for many years. Fund of funds are familiar territory to him as he has spent the last five years running the private banking side at Credit Suisse. Kearney will be known to many of you as he ran multi-manager funds for Artemis and then Premier.
So here I think we have a very solid team. The next question must be will they disappear quickly? I think not. Duce has been at Credit Suisse for a while and Kearney has made a considerable lifestyle change in moving workplace from Guildford to Canary Wharf. This is not a decision you make lightly, since it affects your family too, so he should be fully committed.
Our own position on the Credit Suisse multi-manager funds was to hold while the firm sorted itself out. I think you need to be more patient with a multi-manager fund than you would be with a regular fund. Generally speaking, they attract bigger holdings than single funds. Anyone investing 50,000 or more in the Credit Suisse funds a few years ago should now be well into the territory of paying capital gains tax if they sold out.
Consequently, if you tell your clients to sell, you must be totally sure that the move is correct. My own experience suggests that clients are loathe to pay anything in CGT so you risk making yourself unpopular.
This highlights one of the problems with multi-manager funds. However, while I have great respect for Potter and Burdett, I really do not feel there is any great need to change in this case.
So is the investment approach of the new team very different? No, the style has stayed similar, with a qualitative approach biased towards boutique and specialist fund managers. The new team are more likely to be sensitive to asset allocation but nevertheless will not be overly aggressive.
The team have access to the Credit Suisse global economic strategic group, which will help them with a top-down overlay. They are also situated with the private banking team (which was not the case in the old days) which should help foster a more constructive dialogue and debate.
The fund selection process is based around a proprietary qualitative scoring system which basically helps them through a buy, sell and hold discipline. It is built around 16 factors, with each one scored out of 10. Funds need an aggregate score over five to be considered for a portfolio.
The team have already reviewed all the portfolios and made some changes. For example, in the Credit Suisse constellation fund, they are reducing the number of funds from 27 to 21, making it a higher conviction portfolio.
I think it is a problem with many multi-manager funds that they have far too many holdings. When you are faced with so many good fund managers, it can be extremely hard to stop the portfolio growing but in reality you do not need much more than 20 funds to make a decent portfolio.
I know that both Kearney and Duce have been on a whirlwind tour of the UK so many of you have probably caught up with them by now. I hope like me you were impressed with their dedication