Pension funds are closely watching how the fallout associated with Credit Suisse Asset Management's relationship with collapsed Greensill Capital may impact their allocations, the money manager and the wider hedge fund industry.
Parent bank Credit Suisse Group AG said on March 18 it would split out its money management unit from the international wealth management division and run it under a new CEO after liquidating about $10 billion in supply chain finance strategies. The strategies were run by CSAM with assets originated and structured by Greensill Capital, a U.K. and Australia-based financial services company that collapsed in early March.
Credit Suisse also warned of financial and reputational hits in the March 18 statement, and that it may lose clients and assets under management over the scandal. The bank is also dealing with the failure of Archegos Capital — a hedge fund that defaulted on margin calls made in late March by Credit Suisse and other banks — which it warned on March 29 "could be highly significant and material to our first quarter results." J.P. Morgan Chase & Co. analysts said in a note that press speculation that Credit Suisse losses could amount to $3 billion to $4 billion was "not an unlikely outcome," according to Bloomberg.
Credit Suisse first suspended trading for the four CSAM-run supply chain finance funds that contained Greensill-backed paper on March 1 due to valuation uncertainties. The funds had more than 1,000 investors, all of whom were institutional or professional investors.
On March 5, Credit Suisse said "valuation uncertainty with respect to certain investments, the reduced availability of insurance coverage for new investments and the substantial challenges to source suitable investments make it currently unachievable for the Credit Suisse supply chain funds to remain invested in accordance with their investment policies," resulting in CSAM fund boards deciding that the strategies "can no longer be appropriately managed." The funds were terminated March 4 and Greensill filed for administration in the U.K. on March 8.
The firm then said on March 31 it had created side pockets for four Credit Suisse Virtuoso SICAV — SIF strategies, run by Credit Suisse Asset Management where certain assets were invested in the now-terminated supply chain finance funds. Trading in these strategies was temporarily suspended on March 1. The side pockets, which contain the illiquid assets associated with the funds, will be liquidated and paid out in cash while trading of the liquid parts of the four strategies is set to resume April 7.