Credit Suisse Asset Management in turn falls into the trap of illiquid assets

After months of doubts, Credit Suisse finally let go of the start-up Greensill. Switzerland’s second-largest bank announced on Monday the immediate suspension of subscriptions and redemptions of 10 billion dollars (8.3 billion euros) of funds from Credit Suisse Asset Management (AM). These products are partly invested in assets financed by the fintech specialist in reverse factoring, a method of financing companies that is theoretically low risk.

Credit Suisse AM’s decision could sign the death sentence for the start-up, of which it was one of the main financiers. Greensill is reportedly considering filing for bankruptcy and scrapping some of his assets to U.S. fund Apollo, the Wall Street Journal. The case could also bring serious discredit on the Swiss manager himself. Indeed, “A certain part of the assets” of Credit Suisse reverse factoring funds AM is currently “Subject to considerable uncertainties as to their exact valuation”, indicates the Swiss bank in a press release, without further details.

H2O remains in trouble, Neil Woodford tries a comeback

The situation echoes the difficulties of other asset managers, mired in betting their funds, too exposed to a small number of unlisted companies. When these experience difficulties, the fall in value or the uncertainty about the value of the securities in the portfolio can lead to a flight of investors, and the impossibility of repaying all customers. Last summer, the London boutique H2O AM, from which Natixis is in the process of being separated, had to freeze 10 billion euros of funds under French law, after doubts about its investments in the companies of Lars Windhorst, a sulphurous man German business. It has just resolved to mandate the investment bank Perella Weinberg, which must help it sell 1.6 billion in assets, still confined. For his part, the former star manager Neil Woodford has just announced his return to the London financial center, less than a year and a half after the resounding closure of his management company. A fall caused by the suspension, in 2017, of its flagship fund entangled in illiquid investments.

In Switzerland, another manager, GAM, has already gone through a serious crisis because of Greensill. In 2018, the alternative manager had to freeze funds exposed to debts structured by the start-up to finance billionaire Sanjeev Gupta, known for the controversial takeover of ailing steelworks, including in France. Despite this serious alert, it was not until 2020 that Greensill found itself in the eye of the storm. Last August, BaFin, the German financial regulator, asked fintech to reduce its exposure to the empire of Sanjeev Gupta.

Two months earlier, Credit Suisse AM had reviewed its reverse factoring funds and amended its investment policy, in particular to limit its exposure to a single borrower. But that was not enough to prevent the products from freezing. Today, the Swiss group gives no indication of their future. Disturbingly, one of the major underwriters was the Japanese group Softbank, which withdrew $ 700 million from the funds last year. However, it is also, via its troubled mega-funds Vision Fund, one of Greensill’s main shareholders and clients. At the end of 2020, he almost entirely wrote down his $ 1.5 billion stake in the start-up, according to Bloomberg.

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