Syz puts a premium on talent
Swiss banker aims to hire only the brightest and best
In his search for talent, Eric Syz, managing director of Geneva-based banking group Syz & Co, never settles for second best.
He says: “There is a lot of talent out there, but you need to work hard to find it. Clients expect you to make money for them, and never lose it. Zero is my benchmark.”
Syz knows he needs to reward performance. He has allowed his stake in the bank to be diluted to 65%, and defections are rare.
The modern art that Syz adores proliferates in his head office. He has sponsored the construction of a technologically-advanced catamaran, convinced it will become the fastest boat to sail on Lake Geneva.
Syz’s powerful intellect has attracted serious talent to his bank. One coup was the hiring from HSBC Republic of Roberto Almaleh, renowned for finding hedge funds for the ultra-rich. Claudio Crivelli, previously at Credit Suisse, has developed a successful business in Locarno.
Syz & Co is divided into three divisions – private banking, a long-only fund operation called Oyster and 3A Alternative Investments.
Privately owned wealth advisers normally draw a veil over their finances, but Syz reckons he has nothing to hide. His annual report, compliant with international accounting standards, is published on the company’s website.
In the year to December, assets under management rose 30% to Sfr30.7bn (€19bn). Performance fees fell but net income totalling Sfr160m came close to the previous year’s Sfr168m.
Syz understands the concerns of the rich as a result of being born into a wealthy family. It made its initial fortune in textiles and later contributed to the growth of Swiss companies such as Nestlé and Credit Suisse.
His early career was at PaineWebber in the 1980s. During that period he fought for a meeting with financier George Soros: “I still remember sitting on a red couch with a hole in it, waiting to see him.” He was suitably impressed: “I invested $100m of my mother’s family office with him, and never looked back.”
In 1984 he joined Swiss private bank Lombard Odier, where he took on mergers, asset management and hedge fund research. Syz was not inspired by the conservativism of the Swiss private banking industry: “Nobody was delivering,” he said. “I felt there was an opportunity to offer rather more.”
He is also disdainful of the way credit write-offs at large banks like UBS have caused problems: “They paid too many short-term bonuses. They should be offered five-year deferred compensation, with clawbacks if write-offs result.”
He started Syz & Co in partnership with Alfredo Piacentini, another Lombard Odier staffer, and Paolo Luban, previously at Bordier private bank.
Syz’s views on asset allocation are, as you might expect, pronounced. Four times out of five, they have an impact on investment strategy.
To guide debate, Syz & Co draws on a quantitative forecasting model called fog-lights. According to Syz: “It informs our asset allocation decisions and we make it available to subscribers. It analyses the outlook for factors such as interest rates, inflation, equities and currencies.”
But Syz said fog-lights can only be the starting point for strategic decisions: “It is particularly difficult for it to forecast currencies, which are subject to political and momentum swings.” Right now, the model suggests that interest rates are set to move sideways or up while equities could move sideways or marginally down.
The bank regularly advises its wealthy clients to move between asset classes to take advantage of changing market conditions. The developing lack of market liquidity persuaded Syz to cut hedge fund weightings to 20% last year, against the more normal 35%.
Syz said he was horrified to discover the extent of bank exposure to poor quality credit instruments. He now reckons the hurricane has blown itself out.
But he said equity markets would remain choppy. Client portfolios have lost 3.5% to 4% over the past year, which does not please Syz, although rivals fared worse. Syz reckons commodity futures are overheated, although he admits to a liking for timber.
His strategic views play a role in style allocation within its funds of hedge funds, whose manager rotation is an above-average 20% a year. 3A chief executive Jean Keller says Syz likes to choose managers with tactical skills of their own. Roughly 30% of performance comes from allocation and 70% from bottom-up decisions.
Flagship product Altin, a listed fund, has grown by more than 205% since launch in 1996, against 133% from the HFR fund of funds composite index. Its volatility is higher than the norm, but its percentage of positive months is 70.4%, against 66.7%. A 3A multi-strategy fund can boast 132% since 1998 against 92% from the composite.
Not every style has performed as well. A long/short fund, for example, is only in line with its composite since launch. But nearly all 3A funds are more than earning their keep. Syz & Co aims to remain a fund of funds specialist, although it is incubating a global long/short single strategy fund.
Oyster long-only products use managers employed by Syz, as well as third parties. A balanced fund has produced 57% since 1999, against 14% from peers. The European Opportunities fund has produced 97% since its 1999 launch, against 23% from the DJ Stoxx 600 index.
Former European manager Nicolas Walewski quit to start his own firm in 2005, to be succeeded by Eric Bendahan, hired by Syz from Axa.
The group has started to market its 3A and Oyster funds more aggressively to wealthy investors and institutions outside Switzerland. It also puts together structured products, but avoids giving tax advice: “I advise my clients who to hire,” said Syz.
del.icio.us
Digg
Newsvine
reddit
StumbleUpon