Date: Wed, 24th June 2020
Source: Business Times
[ZURICH] Credit Suisse Group has started a probe into funds that invest in loans arranged by billionaire financier Lex Greensill and are backed by Masayoshi Son's SoftBank Vision Fund.
Switzerland's second-largest bank is looking into its supply-chain finance funds, which hold short-term corporate loans and finance a number of startups backed by the Vision Fund, according to a person familiar with the matter, who asked not to be identified because the information is private. The loans are sourced by Greensill Capital, which is also backed by SoftBank.
"We are reviewing certain aspects of the matter, as is standard practice in similar circumstances," a spokesperson for the Zurich-based lender said in an emailed statement.
Credit Suisse's chief executive officer Thomas Gottstein is stepping up the bank response to investors' scrutiny as the Financial Times (FT) reported that SoftBank invested more than US$500 million into the funds, raising questions about a potential conflict of interest. The manager of similar vehicles at GAM Holding, Tim Haywood, was dismissed last year for misconduct.
"There is no conflict of interest: Investments made in the funds and the investment decisions made by the funds are separate. Credit Suisse Asset Management has full discretion on credit selection. In addition, strict investment and diversification rules are applied and the funds are only distributed to qualified investors," Credit Suisse said in a statement last week.
Former Morgan Stanley banker Mr Greensill partnered with Credit Suisse in 2017 to create bespoke investment funds that bought corporate invoices. The idea is for such funds to buy loans - arranged by middlemen such as Mr Greensill - so companies can pay their bills early while boosting cash flow. The business accelerated last year when the SoftBank Vision Fund invested almost US$1.50 billion in Greensill Capital.
Four of the 10 largest bets of Credit Suisse's main supply-chain finance fund were Vision Fund companies at the end of March, including Oyo and Fair, making up 15 per cent of its US$5.20 billion assets, the FT wrote.
Swiss financial news portal Insideparadeplatz reported the news of the investigation earlier on Tuesday.
Supply-chain finance has been a fast-growing niche area for Credit Suisse, which managed 437.90 billion Swiss francs (S$644.36 billion) at the end of last year in its asset management unit. Assets in the bank supply-chain funds rose last year as Greensill sought companies to finance before packaging the short-term loans into bundles and selling them to institutional investors.
While the funds quickly drew billions in investment since inception, they have been hit by outflows throughout the pandemic crisis. Credit Suisse clients pulled US$1.60 billion from the funds earlier this year, as they rushed to free up cash in the market rout spurred by the spread of coronavirus, Bloomberg reported in April.
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