Credit Suisse Buys US 'Family Office' Firm

by Carla Johnson, Investors Offshore, London

10 September 2001

Last week Credit Suisse Group, Switzerland's second-biggest bank, acquired 'family office' wealth management boutique Frye-Louis Capital Management (FLCM) in Chicago.

'Family offices' are a sophisticated private banking product which provide wide-ranging asset management services to ultra-wealthy families, as the name implies, and have been one of the fastest-growing parts of the private investment sector in the last few years.

Credit Suisse Private Banking Chief Executive O J Grubel said Credit Suisse bought Frye-Louis because it wants to expand its presence in the high-net-worth arena by re-entering the multi-billion dollar US market, which it exited in 1998 after selling its 'High Net Worth' unit, with $1.3 bn under management, to Royal Bank of Canada because it lacked critical size. Grubel said that Credit Suisse might well make another such acquisition in the near future.

Credit Suisse is believed to be the first bank to buy a traditional family office, says Ray Soudah, of Millennium Associates, who advised Credit Suisse on the deal. Grubel said the logic of such acquisitions was that the firm gained expertise and institutional knowledge that allow it to compete in a highly fragmented market, and that the expertise gained in the States will allow the group to better serve its European clients. American family offices tend to have more expertise in a variety of areas, including trusts and estates, he noted. An increasing number of talented money managers are deciding to work at family offices rather than larger institutions because they have greater control over their business accounts. They have more autonomy regarding how the accounts are managed and they often are able to have more say in the way that they are compensated for their efforts.

The logic for Frye-Louis (apart from the money) is that it is supposed in the industry that high-net-worth clients are attracted to firms that can provide them with services and access to local markets across the globe. Frye-Louis has multiple accounts with more than $30 million in assets in its total $1.5 billion under management. It was founded in 1992 to manage some of the fortunes of the heirs to the privately owned Johnson wax empire. Frye-Louis is one of an estimated 3,000 family offices in the US.

Peter Frye, who will continue as FLCM's chief executive, said: "As part of the Credit Suisse family, we will maintain our boutique approach to serving clients while at the same time gain access to additional resources and expand our national presence in this market."

Credit Suisse Private Banking, which manages SFr489bn ($293bn) for some 300,000 clients, ranks as the world's third-biggest private bank. However, the vast bulk of its private banking business is for wealthy clients who want their money managed offshore, where it is safe from the client's domestic tax authorities.

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