(Bloomberg) — Credit Suisse Group AG expects to book a $450 million impairment charge on its stake in York Capital Management as the U.S. firm winds down most of its hedge fund strategies.
The charge, which could still change, will be booked in the fourth quarter, the Zurich-based bank said Tuesday. Credit Suisse agreed in 2010 to take a stake of about 30% in the firm founded by Jamie Dinan, offering to pay at least $425 million to give clients access to its investments.
Read more: Dinan’s York Capital stepping back from hedge fund business
The charge adds to a series of setbacks and missteps at Credit Suisse this year, ranging from losses on loans to wealthy clients to lackluster trading results, as the market volatility caused by the coronavirus pandemic rattles businesses across the bank. Chief Executive Thomas Gottstein, who took over in February, has been cleaning up the business and restructuring in an effort to simplify the bank.
The asset management business is one of the units that have struggled in this year’s volatility. Credit Suisse has been closing down funds and laying off employees at its alternative asset management business. Actions include shuttering a quantitative fund and taking a 24 million Swiss franc ($26 million) charge on seed capital in a U.S. real estate fund in the third quarter, Chief Financial Officer David Mathers said in a recent interview.
Gottstein said in September that the bank is planning a strategic review of asset management over the next 12 months. For now, he has ruled out a sale or merger.
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Read more: Credit Suisse Shutters Funds in Asset Management Review
Credit Suisse’s asset management operation is split between a more traditional business with long equity and fixed-income strategies sold largely to its private banking clients, and an alternative asset management business in the U.S. consisting of wholly owned hedge funds, a large credit business and a number of smaller funds and external investments.
Credit Suisse said the charge on York Capital will reduce a key measure of capital strength, the so-called common equity Tier 1 ratio, by 7 basis points this quarter, but won’t change that bank’s plans to return capital to shareholders.
York, started in 1991, is winding down most of its hedge fund business and retooling to focus on long-term products after “a year marked by tremendous upheaval and disruption,” according to a letter to clients. Co-Chief Investment Officer Christophe Aurand will be leaving and William Vrattos will take over as sole CIO, Chief Executive Officer Dinan wrote in the letter seen by Bloomberg News.
Dinan has seen the firm’s assets tumble from their $26 billion peak in 2015.
(Adds Credit Suisse asset management changes in 4th paragraph)
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