Kerr's people: Chris Goekjian
Chief executive, Credit Suisse Financial Products
|In the family's native Armenia, the name means "man with blue eyes". Chris Goekjian admits to having trouble with his name. "Within the firm I was sometimes known as "The Goat" and my secretary used to take many calls for Mr Gekko who was the villain arbitrageur and corporate raider in the film Wall Street."
Goekjian wasn't enamoured with either name but his own has since become synonymous with the continuing success of Credit Suisse Financial Products. Is csfp the greatest City of London success story in the 1990s? Certainly there are few companies which could match its earnings performance. The company was founded by Allen Wheat and a team of nine derivatives specialists from Bankers Trust. Wheat's reputation as a prodigious money-maker was already established. At bt he was one of the rising stars within the bank. But Wheat wanted independence, a chance to run his own show. He had talks with several interested parties and, in early 1990, he struck a deal with Hans-Joerg Rudloff, the then chairman and chief executive of Credit Suisse First Boston.
It was a perfect opportunity for both sides. Rudloff could sense the slowing momentum of csfb as its core businesses, especially the international fixed income group, matured or became increasingly commoditized. Derivatives would provide a new profit surge. For Wheat the cs First Boston group offered a better name than Bankers Trust. There was also the balance sheet muscle offered by Credit Suisse, and access to the bank's worldwide client network and commercial banking relationships.
The founding team which moved with Wheat from Bankers Trust included Goekjian, Brady Dougan, Ben Weston, Dan McGanty, Jean-Christian Cheysson, Trevor Price and Shinji Yamada. When Credit Suisse Financial Products was formed in February 1990, they were joined by Marcus Everard and Jim Healy from csfb.
Having obtained the necessary banking licences, csfp began to trade in July 1990. The company made an instant impression in the young and booming derivatives industry. Perhaps more importantly for Wheat and his team, csfp made almost instant profits. By the end of 1990, after only five and a half months of operation, csfp reported a profit after taxes of $14 million.
"Start-up businesses in the financial services industry don't expect to break even until year three, but csfp was probably profitable by the end of the first month," comments a First Boston director in New York.
The best was yet to come. Despite breakneck expansion and recruiting - the number of employees rose from 12 to 180 in the first year - csfp's earnings soared. In 1991 the company earned $121 million net after tax, in 1992 $137 million, in 1993 $304 million, in 1994 $248 million and in 1995 $270 million. In six years, with an initial starting capital of just $150 million, csfp has earned in excess of $1 billion after tax. In each of the last three years, csfp with just 900 employees, has earned more than the whole of the cs First Boston group with around 5,500 employees.
Not surprisingly the shareholders of csfp are delighted. When the company was formed, the ownership was split equally between Credit Suisse and cs First Boston. In 1994 both shareholders sold 10% of their equity to Swiss Re. Credit Suisse retains control of csfp with 56% of the voting shares.
Wheat no longer has an executive role within csfp although he remains on the board and is a senior adviser. In 1995 he handed csfp's reins to Goekjian who was appointed chief executive. Out of the original Bankers Trust staffers who moved with Wheat and the two cs First Boston staff, four - including Goekjian - are still with csfp. Five have moved over to cs First Boston, including Wheat who is president and chief operating officer. Only Dan McGanty and Tony Illya (who resigned last month) are no longer with the group.
Will csfp continue to be a gold mine for its lucky shareholders? The self-assured Goekjian has no doubts about the future growth potential. He points out that when csfp started in 1990, the main competitors were Bankers Trust, jp Morgan, Paribas, Citicorp and Salomon Brothers. Today csfp, jp Morgan and Merrill Lynch lead the field with sbc Warburg improving in fourth place. The commanding position gives the company a definite marketing advantage. Lower sales volume in the United States, reflecting reduced demand for the most sophisticated derivatives products after the adverse publicity surrounding Bankers Trust, has been compensated for by increased demand from east Asia. csfp was able to avoid the Bankers Trust-type pitfalls by much tighter marketing management and paying better attention to customer requirements. In the few instances which have resulted in litigation, the disputes have been settled out of court.
While cs First Boston's high turnover of senior executives has been making press headlines, key defections from csfp have been rare. csfp's attraction as a work place is its own success and, of course, the rewards which accompany that success. Management does not directly own any csfp equity but staff enjoy performance-related awards and bonuses. The compensation of Goekjian, Marcus Everard and other members of the management committee will certainly match that of comparable senior executives at cs First Boston whose total pay last year averaged around $2.5 million each.
Goekjian enjoys skiing and running, and his family. His wife Kim has just given birth to a baby girl, Lily Victoria.
Nick Cournoyer & Mark Evans
Managing directors, Montpelier Asset Management"Psst! Wanna buy a bond fund?" In most instances the response would be a long yawn. Bond funds are dull. Bond funds are for the birds. Bond funds are for people who can't think for themselves.
But what about a bond fund which has risen by 21% in the first six months of the year? Surely 21% sounds too high? Has there been a mistake? Are we talking about an equity fund? Even if it's true, where's the catch?
There isn't a catch for those investors who like a little adventure and want to put some fizz into their fixed income portfolios. Enter the world of Montpelier Asset Management started by Nicholas Cournoyer who cut his teeth on Latin American debt restructuring with Chase Manhattan in New York. There he formed Chase's acclaimed debt trading team before moving to London in 1986 to create a similar operation for the bank. Mark Evans, 31, joined Montpelier via the emerging markets debt group at Morgan Grenfell and ing where he became managing director of ing (uk) Capital Limited when he was only 29.
To find Montpelier's office, forget a trek to the City or - heaven forbid - Canary Wharf. Instead, tell the driver to swing past Harrods, take a right into Montpelier Street and a second left into the chic Knightsbridge backwater of Cheval Place. For the international set this is familiar stamping ground. On the corner is top restaurant Montpeliano (no credit cards) and, on Cheval Place itself, there is Shezan, which has been drawing the rich and famous for 26 years.
What's the secret of Montpelier's success among its small group of funds with total assets at $100 million? The answer is not significantly different from the basic Warren Buffett investment philosophy of "find an undervalued asset, buy it, hold it and watch it grow". But while Buffett bought Cap Cities and Coca Cola, Cournoyer and Evans snapped up debt issued by Bulgaria and the Ivory Coast. His first purchases of Bulgarian debt were in 1991 when he paid seven to eight cents on the dollar. By late 1992 the price had doubled to 15 cents and the Bulgarians, who know a bargain when they see one, offered to buy back the entire debt at 10, with a view that they would realistically have to pay as much as 12.5. However, the attention which this attracted backfired on the Bulgarian bargain hunters and a wave of speculative buying carried the bonds to between 27 and 28. When the Brady agreement was reached in November 1992, the bonds soared again to more than 40%. Even Buffett might have been impressed.
An eye for distressed sale opportunities allowed Cournoyer and Evans also to score heavily on Ivory Coast bonds which traded as low as 4% in 1990, rose to 30% in the emerging market boom of 1993 and currently trade at around 20%. In addition, they made many new friends by anticipating the improving position of Poland long before Moody's assigned an investment grade baa3 credit rating to the country this January.
Cournoyer and Evans are fundamentalists first and opportunistic traders second. Through Cournoyer's long involvement with the underlying debt, Montpelier has become a recognized authority on the Bulgarian and Ivory Coast economies. Last December the company launched its own specialist Bulgarian debt fund. In the recent Micropal survey Montpelier's Consulta emerging markets fund ranked sixth out of similar funds, with a 21.2% gain for the first six months of the year. Can such a performance be maintained? Cournoyer and Evans see no lack of future opportunities. "The market perceives emerging market debt either as sovereign credits which will never disappear or as toxic waste - but they rarely differentiate correctly between the two," comments Cournoyer.
Managing partner, Bridport & Cie, Geneva"Are you sure that there aren't too many financial service companies in Switzerland already?" In 1990, this was the question which friends and potential investors asked Alex Bridport and his partners as they sought to raise capital to form their own agency bond broking company in Geneva.
Even in the recession-affected markets of those days, Alex Bridport was adamant that his business plan was viable. "Perhaps one third of the world's savings outside their country of origin are held in Switzerland. Around 50% of that amount is held in bonds. Investors view their bond holdings in Switzerland simply as an alternative to long-term deposits. Given the size of that bond pool, we knew that there was a role for a totally independent house which could provide strategic advice and reliable execution to the managers of that pool."
Institutional investors as well as some wealthy private individuals shared Bridport's enthusiasm. The initial subscribers, all of whom remain investors today, included gni Limited, Cook & Cie, Edgar de Picciotto (chairman of Union Bancaire Privée), Laskarin sa (controlled by Pierre Mirabaud), Harry Ferguson Holdings, Hon. Andrew Fraser, Kobe Steel, Sorbier (owned by Syz family), Hunter & Co and Edward Mayer (the well-known us lawyer and motor racing enthusiast). The outside investors originally controlled 51% of the capital with the Bridport working partners holding 49%. Following a recent buy-back of stock, these ratios have now been reversed.
Alex Bridport also chose his partners well. He had been managing director of Lehman Brothers (Suisse) after beginning his career at Kleinwort Benson in London. Francois-Marie Monnet, head of research and of the firm's key "monitoring and surveillance" group, was with Morgan Stanley and Unigestion. Thomas Bartholdi, head of trading, worked for Deutsche Bank (Suisse), Chase Manhattan and Samuel Montagu. Enrico Chincarini, head of administration and operations was the European budget and reporting manager for Union Carbide Chemical and Plastics (Europe)."We have never had to change our letterhead," comments Bridport.
Why should portfolio managers turn to an agency broker? "They like the firm's independent position in the market and because we don't assume risk positions, act as underwriters or make markets in securities," says Bridport.
What's the future of Bridport & Cie? Because it takes years to break properly into the Swiss portfolio manager community, there are probably several us investment banks and European commercial banks which would covet b & Cie's network and profitability. But are suitors likely to meet some stiff resistance from Bridport and his partners? A friend in London says: "Remember that Alex's family is directly descended from Lord Nelson of Trafalgar and that his own names are Alexander Nelson Hood which sounds like the advance Royal Navy flotilla at the Battle of Jutland." Potential bidders should take care not to be blown out of the water.