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Opinion

Fortress and FIGJAM

Credit Suisse used to be a byword for bad governance. I remember a friend who worked there in the dot-com days joking: “It’s hard to find a jurisdiction where we are not being sued.’’

But chief executive Oswald Grubel changed all that. Summoned out of retirement in 2002, he was co-head of the bank with John Mack for nearly two years before being appointed sole chief executive of Credit Suisse in 2004. Not many people can claim to have outmanoeuvred Machiavellian Mack.

Last week, Grubel announced excellent results for 2006 – the best in the bank’s history. They’re calling him Saint Ossie in the Swiss Cantons. Net income was up fourfold in the fourth quarter (compared with the fourth quarter of 2005) albeit that asset management limps along. Pre-tax income from continuing operations in this division was down 50% compared with 2005. The press release states: “This decrease reflects lower private equity and other investment-related gains.” I find this odd, given that we are experiencing probably the biggest private equity boom ever.

But it was Grubel’s announcement that he was re-retiring that stunned the market. Brady Dougan, chief executive of the investment bank, will take over as chief executive of the group in May 2007. No-one could quite believe that Grubel was going. We have got so used to leaders clinging to power by their fingernails that a seemly exit is received with a raised eyebrow. “Why is he leaving now? I think we should be told,” queried one rival. Perhaps the answer is that at 63 Grubel would prefer to spend time yodelling in the mountains than yelling at his colleagues. I salute his decision. Devoted readers will know that I am not a big fan of working until you drop dead. People who are defined by their job need to get out more.

And so 47-year-old Brady Dougan will inherit the kingdom. This puts an end to the conspiracy theory that only solid Swiss burghers can do well at Credit Suisse. Mr Dougan is American – and could he be anything else with a name like Brady Dougan? It is one of those monikers that I will never master. I will always be tempted to call him Dougan Brady. It works just as well doesn’t it? I used to have a colleague called Leigh Bruce whom I rarely spoke to. By the time I had finished the internal cross-examination as to whether his name was Lee or Bruce, the urge to converse had passed.


"Dougan was always very keen," a former colleague remembers. "Volunteering for all-nighters when the rest of us were sloping off to the bar"

Another nail in my name coffin is the fact that photogenic Mr Dougan resembles Dougal, the adorable shaggy dog in the Magic Roundabout, a children’s television series popular in the seventies. If Dougal were human, he would look like Dougan with slightly too long hair and a lopsided grin. In reality, I suspect that Dougan is in the Bob Diamond/Edson Mitchell mould: one of those all-conquering American heroes who are intensely focused on business and sport. Stories circulate about Dougan’s ferocious work ethos and attention to detail. “He was always very keen,” a former colleague remembers. “Volunteering for all-nighters when the rest of us were sloping off to the bar.” Apparently, Brady takes copious notes of conversations in a large notebook. “Stick to the plan,” is his motto. I am full of admiration. I have difficulty formulating the plan, let alone sticking to it.


Dougan is a marathon runner and his successor as head of the investment bank, Paul Calello, is also a runner. Callello, like Dougan, started his career in derivatives, and most recently was responsible for the firm’s Asia-Pacific operations. “I like Calello,” a commentator observed. “He’s bright, straightforward and the pomposity factor is low.”


Any pebble that is dropped into the sea causes ripples. And perhaps all is not as smooth as it seems. Obviously, there is depth of talent within Credit Suisse but they are also hiring for key positions from outside the firm. On February 5, it was announced that Michael Ryan was joining from Goldman Sachs as head of securities at the investment bank with responsibility for both the fixed income and equities division. Credit Suisse had mixed results in equity trading last year and Ryan who was co-head of the equity products group at Goldman, should help fix that. However, giving him responsibility for fixed income as well will surely irritate Jim Healy, the firm’s existing head of fixed income, who now has to report to Ryan. Watch this space. And last week, it was announced that Robert Shafir had been recruited from Lehman Brothers as CEO of the Americas. Am I the only person who finds it odd that Credit Suisse needs to look outside to fill this position?


Nevertheless, you have to congratulate Herr Grubel as he waltzes towards the door, leaving these minor issues to lesser mortals. And some competitors could learn the lesson that successful succession planning ensures a lasting legacy. John Mack and Chuck Prince, please note. The partners of hedge fund and private equity group Fortress are also interested in a lasting legacy. Their recent initial public offering on the New York Stock Exchange was the talk of the town. The $30 billion money manager sold 34 million A shares.  And there was a feeding frenzy. The issue was 24 times oversubscribed and the shares, which were priced at $18.50, spiralled up 67% to close the first day’s trading at $31.

The issue price equated to an implied 2007 price/earnings ratio of 20. Not bad for a nine-year old firm. Goldman Sachs after all is trading on a P/E of 11 and Credit Suisse has a P/E of 9. Fortress’s founders – Wesley Edens, Randal Nardone and Robert Kauffman – must be paper billionaires and they have not even surrendered control of the company. One hundred percent of the outstanding Class B shares (constituting approximately 77% of the voting power) are owned by Fortress principals.

Wes, Randy and Bob could be forgiven for exhibiting FIGJAM syndrome as they saunter into their exclusive country clubs, at the weekend. In case you were wondering, FIGJAM stands for “Fxxx, I’m good, just ask me”. For full effect, the phrase needs to be accompanied by a suitable hand gesture. I suggest running fingers through a leonine mane of glossy hair. Never forget, it’s a jungle out there. And for me, the furore surrounding the Fortress IPO is reminiscent of all those dot-com debuts.  What do you think?

Next week: Are second-tier banks a necessary evil?  Please send news and views to abigail@euromoney.com

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