Thomas Gottstein, the new CEO of the Swiss bank Credit Suisse, prior the press conference of the full-year results of 2019 in Zurich, Switzerland, Feb 13, 2020. Photo: VCG

Credit Suisse expects to take a roughly $450 million impairment on alternative investment firm York Capital Management's retreat from its core hedge fund business, the Swiss bank said.

The Wall Street Journal on Monday reported the New York-based firm had informed employees and investors about plans to leave its original line of business, wind down its European hedge funds business and convert its US hedge fund into one that primarily manages internal money.

Credit Suisse, which has been an investor in York Capital since 2010, said on Tuesday it expected to take an impairment on its stake in billionaire hedge-fund manager Jamie Dinan's firm in the fourth quarter, which would hit its main capital metric (common equity tier 1) capital ratio by roughly 7 basis points.

"The amount of the impairment taken will be assessed as part of our year-end process, but is currently expected to be approximately $450 million," the bank said.

The impairment would not change its existing guidance for dividends and capital distributions in 2020 and 2021, Switzerland's second-biggest bank said.

The Swiss bank, which made an initial $425 million investment in York a decade ago, said it intended to maintain an interest in York's Asia-Pacific business, which it expects to be spun out.

York Capital, which was founded in 1991 with a focus on US hedge funds, represented roughly 1 percent of the 438 billion Swiss francs ($481 billion) managed by Credit Suisse's asset management business at the end of 2019.

Credit Suisse is scrutinizing its overall strategy for asset management, part of its international wealth management division, after weak earnings within the business, which dropped 26 percent year-on-year through September.

Asset management is spinning out a 3 billion franc Swiss energy infrastructure investment entity, and Chief Executive Thomas Gottstein has spoken of further strategic revisions over the coming year.

Swiss banks have grappled in recent years with the need to scale up asset management to make the business more profitable, but hefty write-offs over larger acquisitions have proved costly for several.

"Experience has shown that it's almost always the selling hedge fund manager that profits from such transactions, and very seldom the buyer," Zuercher Kantonalbank analysts said in a note. 

"Even if the extent of the write-off doesn't shake Credit Suisse to its core, it does show that big banks need to be prepared for major disruption."

York's new strategy will focus on longer-term assets such as private equity, private debt and collateralized loan obligations, Credit Suisse said.