The merger of Swiss banking giants Union Bank of Switzerland and CS Holdings AG would create a global money manager with more than $135.8 billion in assets and a diversified product line.
But its final shape would depend on the overlap between similar product lines and client lists.
Both Swiss banks have large, well-regarded investment management organizations with a good presence in the United States. CS Holdings' Credit Suisse is the parent of BEA Associates, New York, and UBS is parent of UBS Asset Management Inc., New York. The two banks disclosed last week that CS Holding Chairman Rainer E. Gut had approached UBS Chairman Nikolaus Senn to discuss a merger, and Mr. Senn had been agreeable.
The merger talk comes at a time when both money management organizations are expanding U.S. operations. UBSAM would benefit from BEA's larger presence in the U.S. market, said industry observers, but what BEA would gain is unclear.
BEA recently absorbed its sister company, London-based Credit Suisse Investment Management, which nearly doubled its assets. CS Holdings chose BEA as its money management flagship last year when it folded the U.S. operation of its CS First Boston Investment Management subsidiary into BEA. William W. Priest, BEA's chief executive officer, said the CS-UBS talks were "incredibly preliminary" and BEA was proceeding with the CSIM integration.
Thomas E. Messmore, president and chief executive officer of UBSAM, said he suspects there is some overlap between the two firms but added it would be premature to say what kind of combination would emerge.
According to numbers submitted for Pensions & Investments' 1996 Directory of Investment Managers, UBSAM had $37.9 billion in total assets as of Jan. 1 in New York, of which $33 billion was tax-exempt. The asset mix was 26% stocks, 12% bonds, 53% cash, 1% mortgage-backed securities and 7% in timber, oil and gas. According to the British directory Pension Funds and Their Advisers 1996, UBS Asset Management London Ltd. has $62.2 billion in assets under management and $6.1 billion in advisory relationships.
BEA Associates had $21.7 billion under management before absorbing the CSIM assets, including $12.1 billion in tax-exempt assets, according to the P&I directory. It allocated 37% to stocks, 54% to bonds and 9% to derivatives-based strategies. According to Pension Funds and Their Advisers, CSIM had $14 billion in assets and advised $56 billion.
In the U.K. pension market, CSIM and UBSAM are not quite an even match, said Tim Gardener, a consultant with Mercer Investment Consulting Inc., London. UBS leapfrogged over competitors in the 1980s by acquiring Phillips & Drew Fund Management, one of the country's leading managers.