Singapore builds up Julius Baer stake betting worst is over

Singapore has built up a stake of about 3% in Julius Baer Group, providing a major boost for a Swiss wealth manager that's focused on wooing wealthy Asians.

The acquisition through sovereign wealth fund GIC will come as a relief for CEO Bernhard Hodler after Julius Baer's stock fell the most among Switzerland's biggest companies last year. The stock rose Tuesday as much as 3.4%.

GIC has been building up its stake over time and only just now crossed the reporting threshold, according to two people familiar with the matter. Listed companies in Switzerland must to disclose shareholdings when they exceed 3%.

After a decade of rapid expansion, Mr. Hodler is under pressure to maintain the pace of growth even as he pushes through cost cuts and purges riskier accounts. Last month, the bank reported new client money that fell short of its targets.

Julius Baer has put together a shortlist of both internal and external candidates to replace Mr. Hodler as CEO, and may make a decision by the third quarter, according to people familiar with the matter. The bank's former risk chief took the role at the end of 2017 after predecessor Boris Collardi was hired by rival Banque Pictet & Cie.

It's not the first time GIC has invested in Swiss banks. The fund purchased debt in UBS Group early in the financial crisis and became the bank's biggest shareholder when the debt was converted into stock. Stung by the investment, GIC then cut its ownership by almost half two years ago, saying it was "disappointed" that it lost money.

A GIC spokeswoman declined to comment on the Julius Baer stake beyond the regulatory disclosure.

In the financial sector "you don't really get that many opportunities at that kind of price with the growth potential," Song Seng Wun, an economist at CIMB Private Banking in Singapore, said by phone. "Good old-fashioned wealth management with its personal touch is still very important."

Julius Baer ranks fourth among private banks in Asia, with $111.9 billion of assets under management in the region, excluding onshore China, according to Asian Private Banker. The stock was up 2.9% at 40.25 francs as of 10:58 a.m. in Zurich.

GIC doesn't disclose its total holdings, saying only that it manages "well over" $100 billion in more than 40 countries. The London-based Sovereign Wealth Center has put its total holdings at $398 billion, making it one of the world's biggest state funds.

For the year through March 2018, GIC achieved a 20-year annualized rate of return of 3.4%. As of that date, its portfolio was split 37% in bonds and cash, 23% in developed market equities and 17% in emerging market stocks. Private equity and real estate comprised 11% and 7% respectively, while inflation-linked notes accounted for 5%.

The investment adds to signs that the worst may be over for Julius Baer. The bank said margins improved as client activity picked in January and March, boosting fees and trading income. The company is more richly valued than rivals including Credit Suisse Group and UBS.

Julius Baer, which counts BlackRock and Wellington Management among its top shareholders, isn't the only Swiss asset manager attracting big-name investors. GAM Holding, which has been rocked by client redemptions after a fund manager scandal, recently saw billionaire investor George Soros build a 3% stake through a subsidiary of his family office.