Banque Heritage has been in the spotlight following the sale of its family office business to members of the bank’s management team, including Nick de Scossa. Will Cain spoke to Carlos Esteve, CEO and founder of Banque Heritage, about the reasons behind the move.
Despite the recent sale of its family office business, senior bankers at Banque Heritage remain confident its mix of private banking, asset management and merchant banking will continue to deliver, both among HNW individuals and wealthy families.
Nick de Scossa, William Lovering and Andrea Savoretti, previously based at Banque Heritage’s premises in Geneva, have now left to run the business, called The Private Office, as a stand-alone entity.
It followed a meeting between them and senior management at Heritage during which Heritage decided to sell its stake because of a divergence in opinion between the management team of The Private Office and Banque Heritage.
Carlos Esteve, who founded the Banque Heritage business in 1986 to manage the finances of the Esteve family, said the main issue centred around the strategy for growing The Private Office. It appears that neither party was willing to inject capital to grow the business while the other held a stake.
“No-one wanted to have their stake diluted, and neither party was prepared to inject more into the co-investment vehicle,” Esteve told PBI. “We will continue to collaborate with them in certain other areas, but their plans to grow The Private Office business could not be accomplished from within the bank.”
The Private Office, when part of Banque Heritage, was responsible for developing relationships with single-family offices, though Esteve said the business will continue to offer family office services to new and existing clients.
Differences in style
“I appreciate the way they have built the business, but there were two different strategies to take it forward,” Esteve said. “In the end, we agreed amicably to sell our stake.”
In addition, the sale does not impact Banque Heritage’s Heritage & Camuzzi business in Milan. It was one of the first family offices to be started in Italy, set-up in 2000 following the sale of the Camuzzi family’s agro-industry interests. It has since taken on additional family advisory roles and also works with institutional clients.
Banque Heritage will continue to focus on growing its private banking and asset management divisions, as well as its merchant banking joint venture, Heritage Capital, which is based in London but has offices in Sao Paolo and Singapore. Esteve believes the bank’s relationships with small and medium-sized enterprises (SMEs) can help contribute towards its private client business.
Heritage Capital’s investment banking activities operate in a niche different to that of most investment banks – originating and distributing securities to mid-sized investment managers, corporates and family offices – and provides corporate finance and advisory services.
Banks which combine this capability with private banking – Standard Chartered is probably the best example – often develop a deep and strong referrals culture between divisions, with wealthy business clients handing mandates to the private bank and driving assets under management growth. Esteve said he found referrals at times work the other way, with Heritage’s private banking clients approaching advisers to gain access to investment opportunities generated by the merchant banking division.
“The dynamic generally involves high net worth clients providing capital for SMEs for restructuring or advice on business models and mixes,” he said.
“Typically we discuss this offering with clients. If they have interests we try to nail down what they are interested in and present the cast to the investment bankers to see if they can help.”
He also feels an asset management business is an important part of the set-up, an issue which typically divides opinion in the industry, especially among the family office community. Banque Heritage evolved from the single family office of the Esteve family, which made its fortune from the agriculture industry.
Heritage’s investment banking activities operate below the level typical investment banking firms operate in, advising businesses on transactions anywhere between CHF30m ($28.4m) to CHF500m.
“In a wealth recreation environment, the private wealth and merchant banking model has a role to play. The emerging markets are showing particular interest in this,” said Seb Dovey, managing partner at Scorpio, a wealth consultancy.
“Notably, the more nimbly-sized banks like Banque Heritage can reach the parts of the emerging markets world the big investment banking and private banking giants dare not to tread.”
Most family offices, and an increasing number of private banks, however, believe that the asset management and advisory function should be kept separate so as to avoid conflicts of interests.
It is difficult for organisations to promote themselves as independent advisers to clients if the business profits from placing their assets into in-house products, though Esteve maintains Banque Heritage is open architecture.
“These operations were set up to enhance what we have in terms of an offering to our clients,” he said.
“Our mission as a private bank is to offer an expert asset management function. If you do not have that you should not be in private banking, that is our reading of the industry. We have always put an emphasis on that.”
In terms of geographical expansion, Banque Heritage has positioned itself to benefit from the exceptional growth opportunities currently seen in private banking in Asia-Pacific, through the establishment of its office in Singapore.
Esteve said he is “very happy” with inflows in the bank’s Singapore asset management business and that the bank was seeing “strong growth”.
It has CHF7.5bn in assets under management across the group, CHF5.5bn of which are private banking client assets, with a target to reach CHF15bn by the end of 2012.
Esteve said the bank’s investment threshold was CHF1m, though it typically worked with client mandates of between CHF3m and CHF10m.