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Running out of credit

Chris Salih measures the scale of the latest blow dealt to Credit Suisse with the news that income guru Bill Mott is joining start-up firm Psigma Asset Management.

Once a powerhouse in the UK asset management arena, Credit Suisse appears to be facing increasingly difficult times.

Its problems have been compounded with the news that Bill Mott, star of the equity income sector, is returning to the fund management arena long term, not with Credit Suisse but new firm Psigma Asset Management.

Amid all the changes that have occurred at Credit Suisse over the past few years, including the loss of big names such as Ian Chimes and Mark Thomas, the one constant at the group has been Mott.

In 2003, he stepped back from the day-to-day running of the income funds to take on a mentoring role and, even after announcing his retirement last October, he agreed to stay on as strategic director overseeing the funds until the end of the year. His loss to Psigma means the group has effectively lost its safety net.

Where does Credit Suisse go from here? With the exception of the fund of funds business, which continues to compete with the elite in the field under Gary Potter and Robert Burdett, the group’s returns have been mediocre at best.

BestInvest head of communications Justin Modray says its problems go back to the beginning of the decade. He says: “I think you can trace its problems as far back as when James Abate decided to leave the Credit Suisse transatlantic fund. That fund shone under Abate in much the same way that the income fund has performed under Bill Mott and in both cases it has struggled to find replacements.”

Hugh Neuburger and Steve Kaszynski have come and gone as managers of the transatlantic fund and returns have consistently underperformed the sector since January 1, 2003, according to Standard & Poor’s.

Modray says the issues surrounding the income funds have only come to the fore in the past 18 months or so.

He says: “Although Mott has been in and out of the income funds for a number of years, his decision in 2003 to move into an advisory capacity and offer the funds to Leigh Harrison was actually not such a bad move as he was a safe pair of hands who gave reasonable returns and kept the funds on the straight and narrow.”

Chelsea Financial Services managing director Darius McDermott agrees that appointing Harrison was not such a bad move. He says: “While we did take the income funds off the buy list when Mott stepped down, Harrison was actually a good choice as at the time his performance on the alpha income portfolio outstripped that of Bill’s on the income and monthly income funds.

“The problems really started for the income brand when Harrison went to Threadneedle and Errol Francis, who was a relative unknown, had a poor 12-month spell before he left for Schroders late last year.”

The last 12 months have seen the main income fund struggle, coming 51st out of 79 funds in the fiercely competitive UK equity income sector. The fund had £1,075m invested at the end of last October and now has £980m.

McDermott says: “Credit Suisse has been on a bit of slippery slope since 2003 but the loss of Ian Chimes and Mark Thomas has particularly hurt it. Chimes, in particular, was the front man of the group who got along well with the press and adviser community.”

Alan Steel Asset Management financial adviser Alan Adam says: “There have always been problems with the head office in Switzerland and the UK asset management arm in London. Ian Chimes’ departure was the first big signal that things were not that rosy, especially with his right-hand man Mark Thomas also leaving.”

With the income funds in disarray, there now seems a general consensus that Credit Suisse is becoming a one-trick pony, dependant on the performance of its fund of funds.

Modray says: “It is almost do or die for Credit Suisse as the business has been in decline for some time. It has committed to a radical U-turn on its US funds while there is not much compelling coming from the UK. This is not a case of just having an income overhaul as the whole business has struggled.

“The multi-manager performance has stood out by a mile and, if I were Burdett or Potter, I would definitely be banging on the door and asking for a pay rise or a meaningful

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