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Fitch sees risk in CSAM investment teams

EUROPE – Fitch Ratings says Credit Suisse Asset Management is facing risks about the stability of its processes and investment teams.

Fitch has downgraded CSAM from AM2+ to AM2 and pointed to “risks regarding the stability of current processes and investment teams’. The move comes after new management and asset outflows at the division.

Fitch said the downgrade “reflects a continuation of CSAM’s subdued business developments activities, driven by tight cost controls over the last two years, in comparison with a strongly-developing peer group, and changes in management team”.

Earlier this year David Blumer took over as chief executive of asset management amid a corporate revamp. Last month parent Credit Suisse said CSAM lost a net CHF200m (€128.4m) in assets under management in the second quarter. CSAM’s net revenues also fell, by 2% to CHF470m.

“However, we must be clear that this rating does not reflect a declining business position at Credit Suisse or an event risk within the organisation,” said Fitch Ratings director of asset management, Roger Schneider.

“Recent changes in the asset management structure of Credit Suisse – accompanied by new and more portfolio and risk management systems under a new global management board – will eventually lead to a strengthening of the organisation,” the Fitch release stated.

“While I am not concerned that CSAM will succeed in this task, whenever there are changes of that scale there is an effect on the processes. Traditionally the organisation was strong with a reasonably settled investment team. However these changes do create some risk,” said Schneider.

“As an analyst with 20 years in asset management, I consider it to be a risk. These changes make it harder to maintain stability and also result in decreasing momentum.”

CSAM’s head of UK institutional business, Terry Mellish, agreed that the firm has had “challenges”.

“Between 2003 and 2004 we experienced some declining strength and momentum, where international products did not perform as well as we hoped,” he told IPE.

However, he believes that increasing momentum between now and 2006 will see an upgrade to AM2+ once more.

“Fitch has formerly agreed on the strengthening of CSAM and increasing momentum in what we are trying to do in the group. There is a strong and clear idea that key products are affecting our performance,” he added.

“There is positive development, and we are likely to deliver better performance going forward.”

Fitch’s Schneider added: “CSAM clearly acknowledge that they have fallen behind their peer group, and have taken initiatives on a local and global level. This needs to play out over time. They have done the right moves and we will see whether there will be business success in the future.”

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