past year, is embarking on the next stage of a strategy to secure
high growth with an acquisition in offshore Monaco. More buys in
the offshore sector and staff hirings will be the order of the
day.
Swiss private bank Julius Baer has acquired Capital Invest
(Monaco), a Monaco-based advisory firm, for an undisclosed sum, in
line with its strategy to increase its presence in key
private-banking markets worldwide
Go deeper with GlobalData
Capital Invest offers management services and advice to rich
clients and has more than CHF400 million ($340 million) in assets
under management (AuM). The Swiss bank plans to rename the acquired
business Julius Baer (Monaco), keeping keep the company’s existing
team to ensure continuity of service for its clients.
Vontobel analyst Claudia Meier estimates the takeover price to be
between CHF12 million and CHF20 million, noting that it filled in a
“blank spot” on the map for Baer.
“This acquisition ideally complements our presence in Europe by
enlarging our footprint,” said Alex Widmer, chief executive of
Baer’s private banking business. “The combination of Julius Baer’s
international wealth management expertise and Capital Invest’s
extensive knowledge of the local market and existing business
network will provide us with a solid foundation upon which to build
a strong franchise in Monaco.”
Baer has been on the equivalent of private banking steroids since
it acquired a group of private banks for CHF5.6 billion in 2005
from UBS. At the same time, it has been aggressively luring staff
from rivals to build foreign outposts in Hong Kong, Singapore and
Dubai.
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By GlobalDataAcquisition of Capital Invest reflects a new stage in Baer’s
expansion aimed at maintaining the huge momentum given by the deal
with UBS, which included hedge fund manager GAM.
In an investor presentation, two senior Baer executives, chief
financial officer Dieter Enkelman and head of investor relations
Jan Bielinski, provided guidance over future strategy. The bank
will continue to increase its teams of financial advisers, with a
focus on the developing markets, according to a briefing released
by Bear Stearns International after their presentation.
Bear Stearns’s reading is that the Swiss bank clearly recognises
that it has enjoyed a “strong run” after the acquisitions from UBS
and the challenge now is to maintain that momentum. This will be
achieved through a number of initiatives, including more hiring and
selective acquisitions, it reckoned.
Baer’s adviser work force increased by 13 percent in the first half
of 2007 and is up 26 percent from June 2006. While hirings of late
have been predominantly from Credit Suisse, Baer has been moving to
target a broader range of institutions.
“The focus is on experienced professionals with ten or 15 years’
experience,” Bear Stearns observes, in its note.
Baer will also start to look more closely at acquisitions, Bear
Stearns added, observing: “These are unlikely to be large, but will
probably mirror the EFG International approach of acquiring three-
to ten-man teams who bring some assets under management with
them.”
Enkelman suggested that obvious target areas would be the offshore
centres of Gibraltar and Luxembourg – apart from Monaco. In
addition, Baer also seems keen to “roll up” more businesses in
Switzerland.
Baer is also putting more focus on reaching its target of a gross
margin of 100 basis points in private banking. In the first half of
2007 it stood at 92.9 basis points.
A big part of this drive for margin will be achieved by selling a
greater proportion of in-house investment products. At present,
around 10 percent of Baer’s own European funds are with private
banking clients. Furthermore, these are predominantly money market
products.
The aim is to increase the penetration of the private banking
client base and move its clientele into higher margin equity
products. The level of cross-selling into the bank’s private
banking clients is considered to be unsatisfactory but offers a
major opportunity.
“It seems evident that this will be given a big push in 2008, when
Beat Wittmann arrives from Clariden Leu, Credit Suisse’s wealth
management subsidiary,” Bear Stearns notes.
In addition, the value of products from the GAM alternative assets
operation bought from UBS and now being sold to Baer private
banking clients has risen from 4 percent of GAM’s total AuM at the
time of the acquisition to 8 percent at the end of the first half
of 2007.
At the same time, the share of GAM AuM with UBS clients has fallen
from 40 percent of the total in 2005 to 33 percent currently.
However, in absolute terms the AuM with UBS clients has risen from
CHF28 billion to CHF31 billion. This is said to illustrate the
attractions of the GAM product.
Bear Stearns continues to believe that Baer may consider selling
its US asset management arm, commenting: “This business has no real
synergies with the rest of the group. The most likely buyer is the
management team.”
Baer similarly sold its UK asset manager division to management
earlier this year, renaming it Augustus Asset Managers.
Unlike many competitors, Baer doesn’t feel the need to forge links
between private banking and investment banking. Wilfried Kofmehl,
the chief executive of Baer’s Singapore-based operation and
regional head of South-East Asia, says the bank doesn’t feel it has
suffered because of the lack of an investment banking
operation.
Baer in the family way
Julius Baer has launched an initiative in Asia to help family
offices for rich clients. Its Julius Baer Family Services is a
business-to-business facility that assists international family
offices to manage the wealth of their clients out of Singapore.
Baer claims that it the first Singapore-based service of its
kind.
“From our base in Singapore, we can offer expert service and advice
for professional portfolio managers and family offices as they
transfer a portion of their clients’ private financial assets to
Asia in order to capitalise on the excellent growth and
diversification opportunities offered by this key market,” said
Geoffroy Dedieu, a Julius Baer managing director and head of family
services.
