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Suisse rocks and rolls

Credit Suisse was once the glam star but now it looks like a one-hit wonder

Go back to the summer of 2001 and Credit Suisse Asset Management was one of the darlings of the investment world. On one balmy July night, its staff danced the night away in platform shoes, crushed velvet flares and Afro wigs at a 1970s’ disco to celebrate the 25th anniversary of its income fund. But now it is Credit Suisse that has fallen out of fashion.

The ups and downs of Credit Suisse starkly illustrate the precarious nature of fund groups dominated by a handful of key players.

In the aftermath of the dotcom crash, it was selling funds hand over fist thanks to one manager – Bill Mott. His style and remit were a perfect foil for the chaos that rocked the stockmarkets between 2000 and 2003 and his two equity income funds soared while others flagged.

Backed by a slick sales team led by the Ian Chimes and Mark Thomas, investors flocked in their thousands to get a piece of Mott.

His equity income fund doubled in size to £950m in just a couple of years and CSAM regularly featured at the top of the sales leagues.

Sadly for the 60,000-odd investors who bought the income funds, the wheels started to fall off in 2003 when Mott decided to stand down from running the fund again (he did it in 1999 when he was promoted to the position of head of UK equities before returning to manage the fund in 2000).

Chimes and Thomas went to work and did a brilliant PR job in persuading the lion’s share of investors to stick by the replacement Leigh Harrison, with Mott close by as strategic adviser.

Many IFAs put the fund on hold, but did not put up the sell signs en masse.

Yet performance had already started to slip and income and monthly income had been knocked off most IFA buy lists by the time that Harrison quit for Threadneedle in November 2005, to be replaced by Errol Francis.

The funds continued to underperform their average peers and last month Francis quit in farcical circumstances with poor old Mott dragging himself out of retirement just 10 days after picking up his gold watch.

But the income funds are not the only problem for CSAM. Performance across the board has been nothing short of appalling of late. Of its 36 funds, 25 (or 70 per cent) have underperformed the average in their sector – with just five achieving top- quartile numbers.

For the record, the winners are European Frontiers, Managed Assets, Mid-250, Cautious Managed Portfolio and UK Small Companies.

Over the past three years, 20 out of 33 funds have delivered sub-standard performance, with just three delivering top-quartile numbers.

For a group that once said it wanted to be second to Fidelity in the fund league, it has a mighty struggle ahead because it appears to be a rudderless ship. The fact that Chimes’ role has been divided up, rather than given to one person, sends out the signal that its ambitions of grandeur may have been consigned to the bin. The driving forces behind its ascendancy have jumped ship, while fund performance has been poor.

Mott has graciously agreed to fill the void until a replacement can be found (a smidgeon of comfort for investors) but it will have its work cut out luring a manager fit to lace his boots.

Many advisers have now lost patience with CSAM and are telling clients to ditch its income funds.

It is not a complete lost cause should Raoul Bachmann, who has taken over some of Chimes’ responsibilities, wants to relight CSAM’s fire.

Performance of a couple of funds – European Frontiers managed by Elizabeth Eaton in particular – is beginning to get noticed, while its multi-manager team headed by Gary Potter and Robert Burdett have earned respect among IFAs. It is not a reason to get the party wigs out, but it gives CSAM hope.

Paul Farrow is money editor at The Sunday TelegraphMoney Marketing

50 Poland Street, London W1F 7AX

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