EFG severs last link with Marble Bar
Diversified private banking group EFG International is to sell the remaining interest it has in Marble Bar Asset Management back to that unit’s senior managers, however the CHF 28.8m transaction price is far below the sums in the purchase package it announced in late 2007.
In December 2007, the Swiss private banking group said it would pay an initial $517m in cash – most locked into MBAM funds – plus a six-year earn-out of between $300m and $800m in a mixture of cash and locked EFGI shares.
EFGI had invested in MBAM since the hedge fund’s inception in 2002, and said in M&A material that it “firmly believes that the business is sustainable, and has growth potential. We believe that there is a small pool of exceptional talent, and that key individuals of MBAM are part of this group”.
Shortly after that announcement, though, the hedge fund industry and MBAM suffered heavy outflows, often despite creditable performance by talented managers.
MBAM had about $4.4bn in late 2007, according to material accompanying the proposed purchase by EFGI. However, as the credit crunch hit, investors drained its funds – not least because the managers stood firmly by a promise not to curb withdrawals.
MBAM’s managers were talented – MBAM’s worst fund in 2008 lost just 2% of its value as the industry lost 19% – but in the second half of 2008, investors pulled 45% of their assets from MBAM nevertheless.
Given such mass redemptions, the purchases of hedge fund firms did not turn out to be what many buyers had hoped before the crisis.
EFG International is now moving to refocus on private banking once more.
It already took significant write-downs on its stake in MBAM.
It said the latest move, expected to close next quarter, would result in an exceptional accounting net gain of about CHF 7m in the group’s 2012 financial statements.
EFG already transferred the equity stake it held in MBAM back to the hedge fund’s managers in 2010, and will sell its perpetual cash flow stream linked to MBAM revenues back to MBAM’s managers by July.