Units For Sale: Credit Suisse Customized Fund Investment Group, Credit Suisse Strategic Partners
Assets Managed/Raised: Customized Fund Group ($27.7 Billion in AUM); Strategic Partners ($11 Billion Raised)
Unit Leadership: Kelly Williams (Customized Fund Group); Stephen Chen (Strategic Partners)
The units for sale are its fund-of-funds group, the Credit Suisse Customized Fund Investment Group, which oversees $27.7 billion in private equity positions, and Credit Suisse Strategic Partners, the bank’s private equity secondary shop, which has raised $11 billion across five secondary funds. Credit Suisse plans to hang onto DLJ Merchant Banking Partners, the bank’s mid-market buyout shop, which hasn’t raised a new fund since 2006, according to Suzanne Fleming, a Credit Suisse spokeswoman.
The drive to sell the two units follows other recent sales of fund-of-funds and secondary businesses, especially in Europe. In early July, for instance, Swiss Re, the giant reinsurer, sold off its Swiss Re Private Equity Partners fund-of-funds unit, which manages $7 billion in fund assets, to BlackRock Private Equity Partners. Last year, AlpInvest Partners, the world’s largest fund-of-funds manager with $50.6 billion in assets, was sold to The Carlyle Group. And a sale of AXA Private Equity by its parent, the giant French insurer, has also been discussed in news reports.
The trend by European banks and insurers to sell off their private equity businesses comes amid three related trends, including the desire by banks to spin-off non-core assets amid growing European economic uncertainty, higher reserve requirements from new international Basel III regulations, as well as the Volcker Rule under the American Dodd-Frank law, which is forcing banks to reduce their exposure to riskier assets like hedge funds and private equity.
Credit Suisse’s plan to sell two of its private equity units follows a June report by Switzerland’s central bank saying that Credit Suisse urgently needed to bolster its capital base. According to sister news service Reuters, Brady Dougan, the bank’s chief executive, said in a conference call that while he disagreed with the report’s “style and substance,” he did recognize that it was wise to bolster the bank’s capital base anyway.
Selling the units is part of an overall effort to raise $15.6 billion to boost the bank’s capital reserve ratio to 10 percent by 2013. The bank told Reuters that its current reserve ratio was about 7 percent. Credit Suisse was one of several European banking giants that saw its debt rating reduced earlier this year by Moody’s Investors Service Inc., the credit rating agency.
Functionally, the move means that Credit Suisse will refocus its asset management functions more on liquid assets such as stocks, bonds and currencies. According to Fleming, the Credit Suisse spokeswoman, the plan is to keep teams intact in each unit.