NEW YORK -- They met over mutual funds, dated for a year and married. Now Credit Suisse Asset Management and Warburg Pincus Asset Management face the task of merging their respective households.
Careful, say consultants of the ambitious plans of Credit Suisse to integrate with its new acquisition. "This is an interesting merger, but they will have to watch this closely," said consultant Fernand Schoppig, president of FS Associates in West Orange, N.J.
Started with alliance
The two firms became acquainted when they launched a strategic alliance last summer to merge their mutual funds into the Warburg Pincus Funds family.
"It was like a summer job, an engagement," said William Priest, chief executive officer at Credit Suisse Asset Management in New York, of the venture. "The people involved got along terrifically. Warburg's sales of BEA products were successful and the products they emphasized were ones where we demonstrated expertise."
"There is very little overlap. What they lack, we have. And they have capabilities we don't. It's a wonderful blend. There are very few organizations that can fit this well together," Mr. Priest said.
"From a client standpoint, we will go from five to 25 analysts and that's good for them. If the portfolio management staff grows from three to 10, that's good for them, too. Our resources are enriched and the intellectual capital is better. Once we've got this set up, our clients will see the benefit."
"This merger gives us the full range of products and distribution," said Phillip Colebatch, chief executive of the entire Credit Suisse Asset Management organization in Zurich.
The U.S. operation is the fourth focus area of CSAM, he said. Japan, Australia and Switzerland are ready to go and CSAM's position in the western European asset management marketplace just needs to be "stitched together," according to Mr. Colebatch.
The two New York-based firms will emerge as a single asset management house later this year, with $58 billion in total assets, of which $27 billion is institutional tax-exempt.
Name still an unknown
Arnold Reichman, chief operating officer of Warburg Pincus Asset Management, will become the merged firm's chief operating officer. John Furth, who took over Warburg Pincus' small asset management business in 1970 and built it into an operation with $23 billion in managed assets, will be the merged company's U.S. vice chairman.
Picking a name for the merged organization presents the new management with a bit of a dilemma. While Credit Suisse covets the Warburg Pincus name because it is well-known in the high-net-worth and mutual fund markets, the Credit Suisse name has global cache. CSAM's former name of BEA Associates, which was well known to institutional investors, was eliminated in January.
Mr. Priest expects the name, for the near future, will be simply Credit Suisse Asset Management Warburg Pincus, which illustrates the global strength of CSAM and the retail power of Warburg. Eventually, another name will be created, he said.
Credit Suisse Asset Management (Americas) manages $22.7 billion in institutional tax-exempt funds out of $35.3 billion in total assets.
But Warburg Pincus' operation handles only about $5.8 billion for U.S. institutions out of $23.5 billion in total managed assets. It has $10.9 billion in 34 no-load retail mutual funds and $6.8 billion in private client accounts.
That private client money is of significant interest to parent Credit Suisse Group in Zurich, FS Associates' Mr. Schoppig said.
"Few Swiss banks have successfully penetrated the domestic private banking business in the United States. This would give Credit Suisse an entry," he said.
Defined contribution plans
Also, Warburg Pincus Asset Management runs about $2 billion in defined contribution assets, a business that could be greatly expanded through Credit Suisse's pension fund client connections. Credit Suisse began a push in October to break into the 401(k) marketplace.
And Warburg invests almost exclusively in equity, while Credit Suisse is about 20% invested in stocks, 30% in bonds, 10% in mortgage-backed securities and 40% derivatives.
Warburg will benefit from Credit Suisse's European products and global distribution, officials said.
Credit Suisse paid $450 million upfront for Warburg Pincus Asset Management, with a commitment for an additional $200 million if certain future conditions are met. The deal is scheduled to close by midyear.
Credit Suisse bought 80% of BEA in 1990 and the remainder in 1997. It has operated as the U.S. headquarters for Credit Suisse Asset Management, Zurich, which has $210 billion under management worldwide.
