Credit Suisse Group AG (NYSE:CS) has planned to stop taking new stakes in hedge funds and other investment managers through an affiliate. The move from the bank is the latest step in reaction to the stricter regulations placed on the way banks managed their capital and risks.
As per the people familiar with the matter the Asset Management Finance unit dissolved its investment team after failing to offload a part of its portfolio to the private-equity giants The Blackstone Group L.P. (NYSE:BX) and Carlyle Group LP (NASDAQ:CG).
The Swiss bank informed last month to the employees that AMF Chief Executive Brian Finn had decided to retire. The big bank plans to carry on with the AMF’s investments, including those in Reservoir Capital Group and Brigade Capital Management.
The decision from Credit Suisse Group AG (NYSE:CS) follows the tougher rules imposed by authorities across the globe. The bank plans to restrict its direct investments in hedge funds with an aim to meet the guidelines of new international capital rules, Basel III, which will be put into effect from this year.
Any new investments by AMF would have increased the banks risk-weighted assets thereby increasing the capital requires to cover such risk. Also, the decision was important from the point of view that Swiss central bank have already warned Credit Suisse past summer about its weak capital cushion. In July, Credit Suisse revealed plans to raise billions in new money and shed some asset-management businesses.
Credit Suisse Group AG (NYSE:CS) acquired the New York-based AMF in 2008. The AMF holds stakes in more than 20 asset managers, including Brigade Capital, FX Concepts, Lucidus Capital and MIR Investment Management.
Last month, at the time earnings release, Switzerland’s second-largest bank, increased its cost reduction target for the third time in seven months. The bank plans to save an additional 400 million Swiss francs ($441 million) by the end of 2015, over and above the earlier announcement of 4 billion francs in 2011.
For the fourth quarter, Credit Suisse Group AG (NYSE:CS)’s investment bank posted pretax earnings of 298 million francs against the loss of 43 billion francs a year earlier. Revenue for the investment bank declined 6 percent to 2.66 billion francs in the quarter. Fixed income revenues fell by 39 percent to 887 million francs.