SBC buys US fund manager for dollars 750m: Bank admits slip-up in predicting market movements

SWISS BANK Corporation is paying dollars 750m for Brinson Partners, a big Chicago fund manager, in a deal that it says will lead to a substantial expansion of the group's international fund management business.

SBC, one of the big three Swiss banks, is buying a firm with dollars 36bn under management and a US market share of 1.5 per cent. Rudi Bogni, head of SBC's London operations, said the acquisition was part of a global strategy to expand in fund management.

The bank plans to expand its London fund management business with Brinson's existing small operation in the UK and is likely to begin hiring new staff early next year.

SBC's strength has been in managing funds from Switzerland and it has been slow to move into wider international fund management. 'The Brinson deal is the major building block,' Mr Bogni said.

He expected tangible signs of growth at the UK end by early 1995 as the existing international fund management businesses in London, Paris, New York and Tokyo were integrated into a new unit within the group.

The purchase price for Brinson includes a down-payment and performance-related payments over the next seven years, largely in SBC bearer shares. But SBC is setting aside the whole financing cost immediately as a charge against capital and reserves.

SBC also admitted yesterday that it had wrongly predicted financial market developments earlier this year. 'We call this a slip- up but it has not affected our goals and strategy,' said Georges Blum, chief executive.

He said the bank had earned well in the first quarter of this year with its forecasts of financial market trends but had been surprised by the US Federal Reserve's decision to raise its discount rate in February. SBC had wrongly forecast trends and the volatility in South-east Asian equity markets and European interest rates.

'We did not expect that an increase in the US discount rate would lead to such an increase in Swiss short-term and long-term money market rates,' Mr Blum said.

He said the bank thought at the beginning of the year that Swiss interest rates would fall. In order to win market share, SBC decided to start offering fixed-rate mortgages under 5 per cent. The increase in Swiss interest rates had squeezed SBC's margins in the mortgage business in the first quarter.