Thu, Apr 26, 2018
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Credit Suisse moves deeper into hedge fund with minority stake in York Capital Management

Wednesday, September 15, 2010
Opalesque Industry Update – While most U.S. banks are shunning hedge funds with the enactment of the Dodd-Frank Act, Credit Suisse Group AG is doing the opposite with the acquisition of a $425m minority stake with New York-based global hedge fund York Capital Management.

Under the terms of the deal, York will continue to be run independently by founder and CEO Jamie Dinan, and CIO Dan Schwartz. The two firms also agreed to provide for earn-out payments based on five-year financial performance by York and a retention arrangement for the CEO, CIO and other senior York principals.

In a statement, Credit Suisse said the deal with York is a non-controlling interest and not an investment in York’s fund. It pointed out that this is consistent with the rules under the Dodd-Frank Act which prohibits banks to invest its own money in hedge funds.

President Barack Obama signed the 2,319-page Dodd-Frank Wall Street Reform and Consumer Protection Act in July. Under the new law, banks are limited to invest in proprietary trading to no more than 3% of their Tier 1 capital and the law limits the aggregate investment in any and all hedge funds and private equity to no more than 3% of its Tier 1 capital. Banks are given between four and seven years to comply with said provision.

Credit Suisse’s Asset Management Division CIO Rob Shafir commented on the deal, “This relationship with York is an important next step in executing our growth strategy in Asset Management and extending Credit Suisse's leadership in global alternative investments. Our clients will have access to a top-tier suite of products, independently managed by York, and benefit from using York’s proven approach that has delivered superior returns to investors across market cycles. We look forward to working with Jamie and his experienced team.”

News of the deal sent shares of Credit Suisse up by 34 cents to $46.93 during Tuesday’s trading, it was reported.

Shafir explained that Credit Suisse’s latest move is in line with the bank’s move towards alternative offerings, including hedge funds. He said this reflects a trend in the industry to “morph and institutionalize” in the face of the financial reforms.

"Until the rules were written and we had clarity about what could be done around the sponsorship of hedge funds, we clearly did not do a deal," Shafir told Wall Street Journal.

The Journal added that the agreement could be profitable for York as the $425m payment made by Credit Suisse could more than double over time as the bank would sweeten payments depending on York’s performance.

Founded in 1991, York Capital Management has offices in New York, Washington, DC, London and Hong Kong. The firm manages approximately $14bn on behalf of institutions, endowments, foundations, fund of funds, wealthy individuals and their families.

The firm returned roughly 45% in its flagship multi-strategy fund in 2009, beating industry averages. The fund's average annual return is a better-than-average 15%, said Wall Street Journal. York Capital Management was apparently already in talks with Credit Suisse Group about the bank's interest in buying a minority stake back in March.

A source told China Hedge Weekly in June that China Investment Corporation, the nation's $200bn sovereign wealth fund, may invest in hedge funds managed by York Capital Management. No news of such investments since then.
- Precy Dumlao

PD

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - Sequoia takes Facebook stake as shares slide in data controversy, $1.4b hedge fund sees intact fundamentals for Facebook, Jim Cramer reveals some 'suggested hedge fund trades' amid the Trump tariffs[more]

    Sequoia takes Facebook stake as shares slide in data controversy From Bloomberg.com: The $4.2 billion Sequoia Fund bought a small position in Facebook Inc. as the stock slid late in the first quarter, investment manager Ruane, Cunniff & Goldfarb told clients. "The recent controversy enab

  2. Activist Investors - Blue Sky-owned Wild Breads faces uncertain future[more]

    From AFR.com: A Blue Sky private equity investment in artisan-style baker Wild Breads enjoyed multiple valuation upgrades despite losing millions and breaching its lending covenants, accounts lodged with the regulator last week show. Wild Breads lost $2.4 million in 2017, but Blue Sky ascribed a hig

  3. Opalesque Exclusive: Barnegat to close hedge fund to outside investors on weak opportunities[more]

    Komfie Manalo, Opalesque Asia: Bob Treue's Barnegat Fund Management said it is closing its $666m fixed income relative value hedge fund to outside investors. "The negative side to gains in Fixed Income Arbitrage is that unless we find new opportunit

  4. Investing - Hedge fund makes a big bet on malls, British hedge fund manager Odey short UK government bonds on QE bet[more]

    Hedge fund makes a big bet on malls From Barrons.com: The dominant narrative on American shopping malls is that they're dead. Crushed by Amazon.com, many brick-and-mortar retail stores are destined for bankruptcy. And where is the most retail, clustered all together? Malls. From a

  5. Performance - Hedge funds suffer first back-to-back loss in two years, Netflix performance burns hedge fund short sellers, Macro hedge fund up 14.5% in first quarter sees dollar falling, Renaissance Technologies rebounds across hedge funds in March[more]

    Hedge funds suffer first back-to-back loss in two years From Bloomberg.com: Hedge Fund returns sank for a second straight month in March, the first back-to-back loss since the first two months of 2016, as trade wars, tech-sector woes and a Fed rate hike dragged down the S&P 500 from its