Credit Suisse freezes US$1b of funds as scandal widens

[ZURICH] Credit Suisse Group froze four more funds that invested in the bank's US$10 billion supply chain finance strategy, adding to the widening scandal surrounding the bank's exposure to Lex Greensill's failed empire.

The Swiss lender said it decided to temporarily freeze redemptions and suspend the calculation of the net asset value per share of the funds effective March 1, according to an investor update on its website. The funds, with about US$1 billion of combined assets, include the Credit Suisse Multi Strategy Bond Fund and a Multi Strategy Alternative Fund.

Credit Suisse froze US$10 billion of supply chain finance funds last week after doubts emerged about the valuations of some of the assets, kicking off a chain of events that culminated in the collapse of Greensill Capital.

The bank is now liquidating the strategy, a group of short-term debt funds for which Greensill had provided the assets and which had been held up as a success story as recently as December.

While the money pools are returning most of their cash and equivalents, about two-thirds of investor money remains tied up.

Credit Suisse has started an internal probe into the funds' collapse and temporarily replaced three employees in its asset management unit tied to the strategy.

Michel Degen, head of asset management in Switzerland and EMEA, is being replaced on an interim basis by Filippo Rima, according to a person with knowledge of the matter. Luc Mathys, head of fixed income in the unit, and another manager who ran the funds were also suspended from their roles, the person said.

The Swiss lender is also reaching out to external firms to deal with regulators' queries surrounding the collapse, people familiar with the matter said, asking for anonymity in discussing internal information. Many of the assets in the funds have insurance protection to make them more appealing for investors seeking alternatives to money markets.

But the second-biggest of them, the High Income Fund, doesn't use insurance. It's also the fund with the least liquidity, with less than 20 per cent of the net assets in cash.

The other two more recently suspended funds are the Credit Suisse (Lux) Qatar Enhanced Short Duration Fund and Credit Suisse (Lux) Institutional Target Volatility Fund.

Greensill's stunning fall in a matter of days was set in motion last year when Tokio Marine's Bond & Credit unit decided not to renew policies covering billions of dollars of loans the supply chain finance firm made.

Protection against default on some US$4.6 billion in credit lapsed this month after a futile effort by Greensill to get an injunction to keep it going, court documents show.

BLOOMBERG