Credit Suisse Halts Star Trader’s Fund on Risk Concerns
Credit Suisse Group AG paused the launch of a credit fund run by star trader Hamza Lemssouguer as it dials back risk in the aftermath of the twin implosions of Archegos Capital Management and Greensill Capital, according to people familiar with the decision.
The pause marks a shift for Credit Suisse, which last year lured Lemssouguer back from Ken Griffin’s hedge fund Citadel and gave him a new role overseeing the launch of a credit strategy in the asset unit. The fund targeted as much as $500 million in assets, according to an investor update seen by Bloomberg News.
A spokesperson for Credit Suisse and Lemssouguer declined to comment.
The reversal comes as Credit Suisse is trying to move past a crisis of confidence triggered by the collapse of family office Archegos and the unraveling of supply-chain firm Greensill in quick succession. The debacles triggered sweeping changes by Chief Executive Thomas Gottstein, who cut the bank’s dividend, overhauled its leadership and is considering spinning off the asset management unit.
“There is without doubt a shakeup going on in the risk department right now,” said Mark Holman, London-based chief executive officer at TwentyFour Asset Management. “As a consequence both new and existing strategies will come under additional scrutiny, especially those that employ leverage.”
Credit Suisse was forced to take a 4.4 billion-franc ($4.8 billion) writedown tied to Archegos, removed risk chief Lara Warner and replaced veteran Eric Varvel as head of asset management. In the latest twist, its prime-brokerage co-heads John Dabbs and Ryan Nelson will step down immediately, according to a company memo on Monday. The Zurich-based bank for now is only approving what it considers uncomplicated and straightforward fund strategies, according to one person.
Over the past few months, Lemssouguer held investor presentations to raise money for his absolute return credit fund, which aimed to take advantage of distortions in credit markets with long and short positions, stressed opportunities, and the capability to single-name shorting, according to the presentation. Former BlackRock Inc. trader Jeysson Abergel was just hired to join Lemssouguer’s team.
Lemssouguer, who’s in his early 30s, quickly climbed the ranks after joining Credit Suisse in 2014. While there, he pushed aggressively into risky corporate debt at the start of last year and traded at least $21 billion in junk debt by mid-March 2020, Bloomberg reported at the time.
Trading activity in Credit Suisse Group AG high-yield bonds was more than twice the average for early afternoon London time at $22.2 million, according to TRACE Market Flow data compiled by Bloomberg.
©2021 Bloomberg L.P.