Greensill Collapse Prompts Credit Suisse To Freeze Four Funds

Switzerland’s Credit Suisse had to freeze four Luxembourg-based funds that invested $10 billion in supply chain finance, adding to the fallout from the collapse of London startup Greensill Capital, Reuters reported on Thursday (March 11).

The second-largest bank in Switzerland was a central funding source for the startup, which was co-founded by Jason Austin and Lex Greensill, a former banker with Citi and Morgan Stanley. Credit Suisse is now having to field questions from regulators and insurers as it figures out how best to deal with Greensill’s insolvency filing.

Credit Suisse announced the temporary suspension of the four funds in an investors’ note, stating that the board decided that it would be too difficult to set an accurate price for the supply chain-linked shares held by these four funds. The affected funds are Credit Suisse (Lux) Multi-Strategy Bond Fund, Credit Suisse (Lux) Multi-Strategy Alternative Fund, Credit Suisse (Lux) Qatar Enhanced Short Duration Fund and Credit Suisse (Lux) Institutional Target Volatility Fund, Reuters reported. The funds held about $1.2 billion at the end of last month, and held between 2.24 percent and 9.59 percent of assets in the now-defunct supply chain finance funds.

The head of the bank’s asset management division — who is responsible for selling the supply chain finance funds to investors — is temporarily stepping down, along with two associates, according to Reuters. A source told Bloomberg that Michel Degen, head of asset management in Switzerland and EMEA, will be temporarily replaced by Filippo Rima. Luc Mathys, head of fixed income in the unit, was also suspended, along with another manager who ran the funds, the source said.

The ripple effect of Greensill’s unraveling is in the early stages, since Credit Suisse locked up $10 million in capital that it needed to operate. Moody’s Investors Service in 2019 had reached the conclusion that supply chain finance — also known as reverse factoring — could hurt liquidity.