Jane Fraser, CEO of Citi Private Bank, was involved in selling off of more than 20 companies worth $9bn (€6.4bn), including an in-house asset management division, before being appointed by the bank’s ultimate boss, Vikram Pandit, to head the wealth management empire running $1,860bn.
Even more impressive was her desire, and success, in holding onto some of the assets she was asked to dispose of. While internally managed funds of hedge funds and private equity vehicles were put under the hammer, HedgeForum is one unit she managed to save from the clearout.
Despite the hedge funds industry refocusing marketing efforts away from private banking to institutional customers, she confidently predicts she will treble the number of funds on the platform from 25 to 75, with a similar increase in assets from the current $3bn over three years.
“Hedge funds will remain, for the ultra high-net worth individual, an important part of any asset allocation and strong players perform well,” says Ms Fraser, who prides herself on her bank’s open architecture approach, with 98 per cent of products sold now sourced from outside the bank.
“But we do believe the way hedge funds will get bought by clients and should be advised, has changed, based on lessons learned since the crisis. You are either a distributor of house products or you are an open architecture player. The notion that you can be both is crazy.”
She says the “new Citi” culture, with the bank re-focused on client franchises rather than distribution, was “Vikram’s call”, although she was happy to carry out the re-structure, which preceded a strengthening of due diligence teams now that only externally managed hedge, private equity and real estate funds are proposed to clients.
“One element is performance, for those funds that got into trouble,” says Ms Fraser. “But the other is how are they actually running themselves?”
She recalls a recent discussion with clients in Citi’s Jakarta office during a trip to Indonesia. “The clients asked why they should buy from Citi rather than the local guys. I told them the intelligence we have on all different countries, compared to a local player, is enormous,” she says, stressing links to Citi’s Global Transaction Services (GTS) franchise, which specialises in servicing hedge funds. “Also, unlike most other banks, we are not trying to put our own product first.”
A recently secured exclusive agreement with The Carlyle Group promotes US distressed real estate to Citi’s clients, with Ms Fraser believing “there is a huge amount of money to be made if you buy the right properties,” as the US economy gradually recovers. Citi’s team also works with local players in developing economies such as Brazil and India to help strengthen the operations of funds before they are offered globally to private clients.
Her bank’s strategists identify the areas they think clients should be buying into before choosing the best provider and offering the funds under a simple pricing schedule, although like most banks, fees could be ramped up once more, when economic prospects look brighter.
“We keep fees simple as there is not enough yield out there for people to lose it to their private bank,” she says. “But we will build that up in the future when things turn good again. It is not in the client’s interest to come in with a crazy pricing schedule at the moment.”
While there seems to be a hidden agenda of boosting assets and margins, Ms Fraser can point to pioneering customer-centric initiatives, such as achieving the best adviser to client ratio across the industry, at 30:1. This was among the key reasons why Citi was selected as Best Global Private Bank by the judging panel for the PWM Global Private Banking Awards in 2010.
Hand in hand with this service ethos, is Citi Private Bank’s new focus on clients investing assets greater than $25m. “With 30 clients per banker, you need to have $25m plus to fit the type of platform we have got,” says Ms Fraser, a former McKinsey consultant used to root and branch restructures and reshaping business models. “At other big banks, with an affluent client base, the private bank is the icing on the cake, not the key proposition.”
Citi aims to be one of two lead private banks chosen by its ultra high net worth clientele, who typically have entrepreneurial, educational and family interests in several regions of the world, such as Eastern Europe, the Middle East, UK and US, demanding a sophisticated capital markets, investment-banking style proposition.
“I really do give a damn about the relationship with Citi overall, not just the private bank,” says Ms Fraser, who rose through the group’s investment bank and encourages the two to work hand in glove to engage clients around both their business and personal wealth. “This is not a job for a typical private banker servicing clients with $5m or $10m. This is for the crème de la crème, and we bring them in through the institutional division internally.”
