Ebner: beaten at his own game?

Ebner liked to portray himself as the defender of the small investor Keystone

The failure of Switzerland's shareholder champion to take his own advice appears to have led to the forced liquidation of four listed investment funds.

Martin Ebner, who used to boast that he believed in financing his investments conservatively, passed majority control of the funds – worth around SFr3 billion ($2 billion) – to Zurich Cantonal Bank this week after their value plummeted.

The bank, which is guaranteed by the state, announced on Wednesday that had taken charge of the funds – Pharma Vision, BK Vision, Spezialitaten Vision and Stillhalter Vision.

On Sunday, Switzerland’s SonntagsZeitung reported that the future of Ebner’s private investment vehicle – BZ Group – now hangs by a silken thread.

The paper cited unnamed sources that said BZ Group was battling with debts of around SFr10 billion ($6.79 billion).

News of the massive debt burden came amid reports that a group of European banks is believed to have provided Ebner with an emergency credit facility worth SFr3 billion ($2.04 billion).

The UK-based Financial Times said on Friday that the banks – which are believed to include Credit Suisse, the Zurich Kantonal Bank and the cantonal banks of Vaud and Schwyz – might have provided the credit to help finance margin calls.

The paper said the banks are thought to have grown anxious at their exposure to Ebner “having lent him several billion Swiss francs, mostly against securities in Swiss companies which have fallen sharply in value”.

In too deep

“Ebner leveraged his funds by borrowing money to buy equities,” Marc Faber, a Hong-Kong based Swiss stock market analyst, told swissinfo. “Ebner basically violated his own rules, and when stocks went down his leveraged position eventually killed him.”

The Swiss multi-millionaire, who convinced thousands of Swiss households to sink money in his investment funds rather than invest in lacklustre savings accounts, had hoped his funds would surpass those of his idol, the American investment tycoon, Warren Buffet.

“But he’s no Warren Buffet in terms of value investing. A value investor buys value but Ebner paid very high prices for certain equities in particular the acquisition of ABB and Credit Suisse. He bought the wrong stocks at very high prices,” added Faber.

Stock market turbulence

Ebner’s liquidity position was baldy hurt in recent weeks as a flood of retail investors sought to bail out of the stock market, forcing his company, the BZ Holding Group, to fork out hundreds of millions of francs.

And his efforts to boost the value of stocks in his investment funds through a buy-back plan cost him further millions.

“He is a child of the bull market. He started his business as the bull market got underway in the early 80s. He doesn’t know that stocks can go down,” said Faber

“There’s a time to buy low and a time to sell when the markets are high. He violated this rule. He kept on buying while stocks were high.”

Faber added that Ebner had also gambled heavily and unwisely on the pharmaceutical and financial sectors.

Zurich Cantonal Bank

On Friday, Zurich Cantonal Bank insisted it would be following a much more “passive strategy” than that pursued by Ebner. The 56-year-old earned a reputation as a ruthless corporate raider, buying shares in companies and then demanding management changes.

“To meddle with companies’ operations or try to force them into something, that’s not our role,” said Urs Ackermann, a spokesman for the bank.

However, Ackermann added that the bank intended to continue the investment strategy for the four funds.

He said there were no plans to make major adjustments in the funds’ holdings, which include large chunks in blue chips such as the ABB engineering group, Credit Suisse, the insurer Baloise and the chemicals groups Lonza.

by Karin Kamp with agencies