I feel I had a small part in his murder. A year ago, I criticised the formation of UBS’ in-house hedge fund, Dillon Read Capital Management, by John Costas. In December 2006, I compared UBS’s third-quarter results to a limp lettuce leaf, wailed about its lax cost control and lamented that Costas’ hedge fund “does not sit easy on the stomach”. In May 2007, DRCM imploded, after losses in the sub-prime mortgage market. In early June, I threw a hissy fit after numerous requests to meet the senior management of UBS’s investment bank were evaded. “Might it be possible that an hour with the Abigail with attitude column is not everyone’s idea of heaven?” I sulked, before thundering: “The demise of Dillon Read Capital Management was greeted gleefully by the press precisely because the operation has been surrounded in opacity.... UBS needs to re-think its press strategy.”
It was gratifying to see UBS heeding my advice. Twelve days after my article was published, Wuffli gave an interview to the Financial Times. A mere two weeks later, he was gone. An air of panic surrounded his ride in the tumbrel to the guillotine. “I think news started to leak, and they were rushed in to making an announcement,” a corporate communications specialist told me.
Wuffli’s deputy, 42-year-old Marcel Rohner, replaced his boss and chairman; Marcel Ospel extended his contract for another three years. A press release divulged that a year ago, Ospel “expressed a wish to initiate a generational change of management at UBS and therefore retire from his function within the foreseeable future. He also proposed that Peter Wuffli be nominated his successor.” Last week, the board rejected this strategy and Wuffli was bundled off-stage. “It was horribly brutal,” a mole moaned. “He became a non-person over night.”
I smell an information lacuna. The board’s rejection of plan A was also a clear rejection of Ospel’s authority. “You got it wrong, Marcel mate,” they said; but then invited him to stay on. They ignore his advice while flattering him by insisting he is indispensable. Isn’t this bizarre? “Look,” an insider explained patiently, “Marcel is the architect of UBS as we know it. He has spent most of his career at the firm. Obviously the board would not want to lose him.”
“Wuffli had to pay for the poor handling of the Dillon Read story,” a well-connected source said. “Remember, he signed off on its creation. And UBS lost good-will, reputation and money because of that decision.” An activist hedge fund manager was more strategic: “After the ABN Amro bid, you have to ask if some of these large financial institutions make sense anymore. For UBS and ING, the answer is probably ‘no’. At UBS, a wonderful wealth business is dragged down by a mediocre investment bank. Is this 42-year old kid, Rohner, going to be able to change that quickly enough?”
Oh dear, ominous words. However, an insider mused: “I’m not sure it would be that easy to unbundle the two businesses. There is quite a lot of cross-over. In Asia, for example, you act as the private banker to a tycoon and then you get a shot at the investment banking business.”
Meanwhile, John Costas, whose bright idea DRCM was, lingers on. I am informed that he still has his role as special adviser to the group executive board. I am sure he is being well-paid for this spurious assignment. Suneel Kamlani and Ramesh Singh are in charge of winding up and reintegrating DRCM, so what is Costas doing? The Abigail with attitude column calls for Mr Costas’ resignation.
Mystery
I wonder what Stan O’Neal, chairman and chief executive of Merrill Lynch makes of it all? UBS’s impressive wealth management business is weak in the US. Merrill’s private client business is mighty in America but punier elsewhere. A combination of the two would be more delicious than New York cheesecake. Stan could pick up the phone to Dick (Richard Fuld, Lehman Brothers’ chief executive) and offer him UBS’ investment bank, whose strong cash equities’ franchise complements Lehman’s fixed income business. I have heard it argued that private clients want the word ‘Switzerland’ on the nameplate. I wonder if that’s true, or merely an excuse for complacency on the part of smug Swiss employees? I look forward to discussing this and other questions with Suneel Kamlani, UBS investment bank’s chief of staff. I am meeting him in September.
In the name of Freedom
And talking of wealth management, GLG is a highly successful hedge fund. Indeed, it is the largest independent alternative investment manager in Europe. Nevertheless, I feel uneasy about its appearance in the public arena. In late June, a special purpose vehicle, Freedom Acquisition Holdings Inc acquired 28% of GLG Partners. Freedom is listed on the American Stock Exchange. The three principals of GLG, Noam Gottesman, Pierre Lagrange and Emmanuel Roman, received approximately $600 million in cash. I don’t like it when senior management cashes in. It says to me that they think this might be the peak of the business cycle. Perhaps a lot of people feel like me because the press release states: “GLG’s equity holders have committed to reinvest 50% of their after-tax cash proceeds into GLG’s funds at full fees.”
Freedom’s shares closed at $10.45 on Friday June 22, the business day before the GLG transaction was announced. This was an 8% rise on the closing level of the previous day. Friday’s volume in Freedom’s shares was more than 20 times Thursday’s volume. A GLG spokesperson had no comment on this trading pattern and directed me to Freedom’s advisers. They had no comment either.
I was amused that the Freedom/GLG transaction press release pompously described Noam Gottesman as: “Founder, managing director and co-CEO of GLG”. Is Mr Gottesman so insecure that he needs three titles? As a woman, one always worries that over-indulgence in titles might mean under-endowment elsewhere. However, on this occasion, such a slur can not be true. Maybe the title-fest reflects enthusiasm on the part of Gottesman’s press adviser, Rupert Younger of Finsbury, a financial public relations company. I spoke to Younger last autumn in connection with a story I was writing about another of his clients, Sir Philip Green, owner of the British retailer, Arcadia. I asked Younger to confirm Sir Philip’s age. “I can’t tell you that,” he bristled.
Younger’s ferocious approach seems to have infected Gottesman. Gottesman has been making derogatory remarks about his former partner, Philippe Jabre. “As far as I’m concerned, he doesn’t exist,” Gottesman harrumphed to a Bloomberg journalist. Gottesman also made another barbed comment about Jabre in a recent British newspaper article. The remark might be defamatory of Jabre. And as Mr Jabre is a wealthy man who probably has a pack of lawyers on speed-dial, I will not repeat it.
Why is Gottesman bitter about Jabre? Jabre managed some $7 billion of funds at GLG and virtually quadrupled investors’ money from 1998 to 2005. Jabre left GLG at the end of 2005 amid a UK Financial Services Authority investigation in to insider trading. In August 2006, the FSA fined GLG and Jabre £750,000 each for market abuse and breaching FSA principles. Since then, GLG has been fined twice by the French regulator for insider trading, though GLG is appealing these rulings. The day after the Freedom reverse takeover, GLG paid $3.2 million to settle SEC accusations of illegal short selling.
Jabre has now established his own hedge fund, Jabre Capital, in Geneva. He is doing well and has some $4 billion under management. Not bad for a six-month-old company. I hear Jabre has recruited at least 10 of his former colleagues. Some clients have voted with their wallets and transferred money from GLG to Jabre Capital. Surely Gottesman, a true master of the universe, doesn’t feel threatened?
Chuckles at Citi
Does Chuck Prince, chairman and chief executive of Citi feel threatened by recent events in the financial markets or does he survey the scene serenely? Described by one insider as: “A dynamic and magnetic human being”, Chuck may not be doing a lot of chuckling. Citi is an opportunity waiting to be seized by activist investors but are any of them bold enough to take on the behemoth? “Prince’s fate,” a mole whispers, “is inextricably linked to the share price: SP down, CP out; it’s as simple as that.”
When I was in New York, I met the urbane Chad Leat, Citi’s co-head of global credit markets. Chad has been in the business for many years and was head of syndicated loans at Chase Manhattan. Chad spent nearly an hour with me, even though he must have been itching to eject me from his office. My appointment was the day the Bear Stearns hedge fund drama was unravelling and Citi is a lender to the funds. Chad told me that in his area, Citi had made a lot of progress during the previous two years. The firm had improved its capabilities in commodities, structured credit, high yield and prime broking. “Very few of the $10-billion deals don’t have Citi or JPMorgan on the top of the ticket,” he said. Citi, of course, was a joint book-runner on the prestigious Blackstone flotation and will be a joint book-runner on the forthcoming KKR flotation.
This ‘we’re on a roll’ sentiment was echoed when I spoke last week to the legendary Charlie Berman, Citi’s co-head of EMEA fixed income capital markets. “All I’m doing at the moment,” he confided, “is pitching, pitching, pitching. But I suppose that’s what we’re meant to do, rather than debate the new seating plan.” Charlie always makes me laugh. This is a rare treat as most bankers are humourless: I’ve known corpses who are more amusing. “Please let me buy you a ‘Flaming Caipirinha’ or whatever it is you young and carefree bohemians drink these days,” Charlie emailed me in early June. We plan to catch up over the summer, so more of Mr Berman in a later column.
Michel de Carvalho, vice-chairman of Citi, has probably not been imbibing many cocktails recently. Michel is very fit. I had breakfast with him in early May and we were spotted by my girlfriend, top headhunter Debbie. “Who was that gorgeous man you were with?” she asked, “I was quite jealous, especially as my candidate had a bad out-break of middle aged acne.” Michel has been training for the Tour de France and will complete one day of the race in mid-July. Michel described a recent practice ride of 140 kilometres, mostly in mountain terrain, lasting six-and-a-quarter hours. I immediately felt faint and nearly fell off my chair with the fatigue.
Awards for excellence
Sadly, Michel was not at the Euromoney Awards for excellence party last night, Charlie Berman was there however. The awards were held at a cavernous venue, the Brewery in London. Charlie and I sat at the same table along with Jonathan Moulds, President of Bank of America, EMEA, Rory Tapner, chairman and CEO of UBS, Asia and Jim Amine, co-head of global leveraged finance at Credit Suisse. At the next table, I glimpsed Peter Sands, chief executive of Standard Chartered, Geert Vinken, global head of syndicate at Barclays Capital, Jean-Pierre Mustier, chief executive of Societe Generale’s investment bank and Walid Chammah, global head of investment banking at Morgan Stanley. Walid’s reputation for charm king of the western hemisphere is well-deserved. He introduced me to his colleague Franck Petitgas, European head of investment banking, who has dancing eyes but no French accent even though he claims to be French.
Morgan Stanley was named Euromoney’s best investment bank for 2007 and Bank of America won the 2007 award for Euromoney’s best bank. On a day when the Dow Jones index leapt 280 points, guests were in festive mood and gave £40,000 to the nominated charity, the Kalinga eye hospital . After the mercifully short awards ceremony, bankers lingered on late in to the night drinking and dancing.
Jonathan Moulds and I decided to visit a night-club for a spot of post-party partying. As we were leaving, a stranger accosted me: "Are you living with Jonathan," he asked "or do you just work for him?" I bit back the retort "Actually he works for me." Instead, I said lamely, "We're good friends." In some respects, the old lines are not always the best.
The column is taking a summer holiday. But we’ll still be watching the markets very closely. So, please send news and views to abigail@euromoney.com
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