Credit Suisse clients flee Greensill-linked funds

(MENAFN- Gulf Times) Credit Suisse Group AG clients pulled $1.6bn from funds that hold short-term corporate loans sourced by billionaire financier Lex Greensill, as they rushed to free up cash in the market rout spurred by the spread of coronavirus.
Assets in three Credit Suisse supply chain Finance funds, which lend firms money to pay suppliers, have shrunk to $7.5bn from $9.1bn at the end of February, according to data compiled by Bloomberg. The drop was fueled by withdrawals from clients including institutions and family offices, said a person familiar with the matter, who asked not to be identified because the details aren't public.
Former Morgan Stanley banker Greensill in 2017 created the bespoke investment funds together with Credit Suisse to draw a wider pool of investors to what's known as invoice-based lending, also called supply-chain finance. The idea is for such funds to make loans arranged by middlemen such as Greensill so companies can pay their bills early while boosting cash flow. The business accelerated last year when Masayoshi Son's SoftBank Vision Fund invested almost $1.5bn in Greensill's company.
The Credit Suisse funds are exposed to companies including NMC Health Plc, which has been placed into administration, and debt-laden metals conglomerate GFG Alliance, although notes related to those two companies are fully covered by insurance. 
The sharpest fall in assets since the virus outbreak was seen in the Credit Suisse Nova Supply Chain Finance High Income Fund, which has lost $842mn since February 28 and recently saw one underlying asset default, the person said.
The $1.5bn High Income fund is the riskiest among Credit Suisse supply chain vehicles because investors are directly exposed to the underlying assets. Defaults in the fund are not always covered by insurance unlike the two other funds but Greensill guarantees up to1% of its losses each year. While it has suffered redemptions, High Income has gained this year: The fund is up 1.3% and has risen 0.7% since February 28, according to data compiled by Bloomberg.
'In the last couple of weeks, the fixed income asset class has generally seen record high outflows, Luc Mathys, Zurich-based head of fixed income at Credit Suisse's asset-management unit, said in response to questions. 'Despite the adverse markets, the supply chain finance funds of Credit Suisse Asset Management have delivered a solid performance.
Mathys says that assets across the three funds are down 20% compared with the beginning of the year, though all redemptions have been met. The funds aren't targeted at retail investors.
Fixed-income funds bore the brunt of an industry exodus last month, comprising more than half of 173bn euros ($189bn) of withdrawals from European mutual and exchange-traded funds through March 27, according to Morningstar Inc data.
Supply-chain finance has been a fast-growing niche area for Credit Suisse, which managed 437.9bn Swiss francs ($454bn) at the end of last year in its asset management unit. Assets in the bank's 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.
Greensill attracted a $250mn investment from the private equity firm General Atlantic in 2018 and has counted former UK prime minister David Cameron as an adviser.
'In the first quarter, Greensill Supply Chain Finance volumes increased 73% year-on-year, a record high, James Doran, a New York-based spokesman for Greensill, said via e-mail, while not commenting on the Credit Suisse client withdrawals. 'Demand continues to increase.

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