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Credit Suisse forms a hedge giant

Credit Suisse's hedge fund competitors better start thinking more globally.

Credit Suisse's hedge fund competitors better start thinking more globally. The big Swiss bank's decision to combine its two fund-of-hedge-fund businesses -- one in Zurich, the other in New York -- constitutes the latest evidence of the growing internationalization of the hedge fund industry.

For Credit Suisse, the merger of the two units had a cultural as well as a geographical impetus.

"We have different strengths," explains Ramon Koss, longtime head of alternative investments and mutual funds for the bank's Zurich-based private banking division, who next month becomes co-head of the new funds and alternative solutions group. "The Zurich team has gone the extra mile on quantitative analysis and has developed proprietary tools and systems to perform detailed assessments; the team in New York has a deeper and broader network of relationships, especially among the old, closed, long-track-record-type hedge funds in the U.S. That is why we are so excited about bringing them together."

Koss, 46, will oversee investment activities like the sourcing and screening of hedge funds, portfolio development and risk oversight; co-head Anthony Pesco, also 46, now head of fund-linked products at Credit Suisse First Boston in New York, will coordinate distribution.

Although the merger is part of Credit Suisse's "one bank" strategy of streamlining its core activities, the integration of the fund-of-hedge-fund teams was anything but simple. They were successful, autonomous and highly competitive businesses with virtually no client overlap. But the bank decided that each unit's strengths would complement the other's.

The new unit will have more than Sf 20 billion ($15.2 billion) in assets, making it one of the world's biggest fund-of-fund groups. The merger of staff and business operations started in September and should be mostly complete by January. One task may take a few more months: designing and implementing a single, expanded technology platform for global fund research and analysis. Koss says he's optimistic that melding the two groups will give Credit Suisse a greater competitive edge in the crowded, increasingly international fund-of-hedge-funds market.

"Right now people understand that we are just trying to make the Atlantic go away," he says, "and I think they appreciate that."