Obituary: Henry Grunfeld


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Henry Grunfeld died on June 10, a few days after celebrating his 95th birthday with his family and close colleagues. He had maintained his regular attendance at his office at Warburg Dillon Read, and his interest in the business and activities of the firm, until the day before his death.

Henry Grunfeld first met Siegmund Warburg at the Hotel des Indes in the Hague in March 1935, through connections of Albert Voegler, head of Vereinigte Stahlwerke, the largest steel combine in Europe and owner of a Berlin private bank, Comes & Co. The Dutch sister of this bank was part of a group sponsoring a company in London called New Trading Company, as a vehicle for Siegmund Warburg.

It was arranged that Grunfeld should stop at the Hague on his way to London from Germany, where he had given up all his positions. There he was introduced to Siegmund Warburg and decided to link his future with the New Trading Company. At first, Grunfeld had his own company with adjoining offices, but after two years New Trading Company bought Grunfeld's company in exchange for shares which in due course became shares of Mercury Securities and thereafter SG Warburg Group.

When Grunfeld came to London in 1935, he brought with him not only his industrial experience from 1922 to 1935 as a partner in Niederstetter and Co, a steel supplier founded by his father, but most importantly his experience both of Nazi persecution and of the financial and stock market collapses of the 1920s - especially the German hyperinflation of that period. His arrest by the Gestapo, and the failure of many of his "friends" to come to his aid, gave him a life-long cynicism about the nature of friendship and of human behaviour in general - albeit no one could be a more loyal friend than Grunfeld. The experience which he and Siegmund Warburg shared of the financial meltdown of the 1920s and 1930s resulted in exceptional caution towards, and a ruthless examination of, all new financial projects. Thus, when the name of SG Warburg & Co was adopted in place of New Trading Company in 1946, they went about their business with a mixture of caution and courage which became the firm's hallmark.

The basic philosophy of the bank was one of originality and imagination, meticulous hard work and loyalty to clients, and the observance of the courtesies and style of "haute banque" practice, together with a willingness to take risks when they had been thoroughly researched. These qualities led to the famous British Aluminium victory of 1958, and the founding of the Eurobond market with the Autostrade issue in 1963 - the two historic transactions which started the enduring primacy of Warburg in mergers and acquisitions and the international capital market. Moreover, during the early post-war period, many of the traditional merchant banks had become quite domestic in their outlook, whereas SG Warburg was inherently international, with its face turned both to continental Europe and to the United States, and it was one of the earliest to take a serious interest in Japan. This enabled Warburg to do business overseas for blue-chip British companies.

Over the years, the complementary compatibility of Henry Grunfeld and Siegmund Warburg was often described as the internal and external face of the bank, with Grunfeld remaining as home anchor and Siegmund Warburg relentlessly on the move. But this was not the whole picture. Grunfeld has to be seen first as the banker who understood better than any other the true nature of banking risk; secondly as the financial director who could read the condition of the bank's own finances with a prudence which enabled it to overcome any financial crisis in the City and the world; and thirdly and most powerfully as the corporate financier who could most successfully achieve an acquisition on behalf of a client or defend it from a predator. On top of this, Grunfeld found time to supervise the bank's metal trading subsidiary, Brandeis Goldschmidt, whose profits were often counter-cyclical to those of the merchant bank, thus contributing to the consistent and impressive profits growth in the 1950s and 1960s which contrasted with the legendary pessimism of Grunfeld's remarks on the business outlook in his chairman's statements.

The wisdom and experience learnt in the 1920s and 1930s contributed to the bank avoiding many of the mistakes into which its competitors fell. An example of this was the headlong rush by many first-class banks to underwrite the IOS group's shares in the mid-1960s when a small group including SG Warburg and NM Rothschild refused the underwriting. The collapse followed soon after and those who had underwritten were contaminated by the mistake. And I remember in my youth, at the bank, asking Grunfeld if we could accept the underwriting of Playboy Enterprises, and being told in withering terms that no respectable bank would underwrite a company which made its money from gambling.

The old offices of SG Warburg in Gresham Street, renowned for their simplicity and asceticism, were furnished with beautiful antique tables, desks and clocks, mostly collected for the bank by Grunfeld and long since written down to nil in the balance sheet. They are still to be seen in the meeting rooms of the much larger organization that Warburg has become. Grunfeld was a lover of Chinese art and the 18th century Chinese paintings in the corridors - all of people working - were and remain a symbol of his contribution to the bank. A visitor to the bank today will also be greeted at the main reception desk by the portraits of Henry Grunfeld and Siegmund Warburg by Raymond Skipp: that of Grunfeld was done after Swiss Bank Corporation's acquisition of SG Warburg, as a mark of appreciation and respect by our new Swiss colleagues. It is reproduced here.

If you visited Grunfeld at the beginning of this decade, when he was approaching 90, you would find three themes in his conversation. The first would concern business transactions being done and contemplated - and he would be full of ideas. The second theme might be his scepticism about some of the new financial instruments generally classed as derivatives. He would invite the leading experts on derivatives to his office and grill them. I do not believe that he was ever satisfied with the explanations, and he would say that no-one fully understood the risks which were being taken. His third theme would be the violent competition which he expected in the late 1990s amongst financial institutions. He correctly predicted the massive consolidation and was deeply concerned that Warburg should not perish in this battle of the giants.

Following the acquisition of SG Warburg by Swiss Bank, some people were upset that such a famous British house should become part of a foreign group: one Warburg director even left on the grounds that he wanted to join a British bank. Such reservations ignored SG Warburg's European roots and its profoundly internationalist principles and Grunfeld saw it as his duty in the last four years to maintain the "Geist" or spirit of the Warburg firm which he and Siegmund Warburg had built up over 60 years. There was no room for euro-scepticism in his philosophy. Grunfeld considered that the Warburg of the past and present had always to be wholly European, combining the best City of London practices with those of the continent and brightly contrasting with, rather than imitating, the finest American houses. Martin Gordon

Martin Gordon is a longtime colleague and friend of Henry Grunfeld.