Credit Suisse revealed on Wednesday it had secured $2.9 billion in commitments for its fifth secondary vehicle, which offered investors a range of favourable terms and conditions amid a difficult fundraising market.
Strategic Partners employed a “European-style” waterfall distribution scheme in Fund IV, in which the GP can only collect carried interest after LPs are paid back committed capital plus an eight percent preferred return.
For Fund V, the team enhanced the distribution scheme to include not only all committed capital, but all fees and fund expenses as well that must be returned to LPs, plus the eight percent preferred return, before the GP starts to collect carried interest.
“That’s as full as you can get and we just pushed everything over to that side and made sure LPs got as friendly as terms in that regard as they can imagine,” said in an interview Stephen Can, global head of the bank’s Strategic Partners group. “We read the [Institutional Limited Partners Association] document and we had some early discussions with our LPs and we just made a decision early-on that they’re our partners, the community wants this and we’ll do it.”
Fundraising took about a year, Can said, and the fund is about 10 percent bigger than the fourth fund, which closed on about $2.5 billion in 2009. The Strategic Partners team was assisted in fundraising by an internal marketing group that works on Credit Suisse specific funds, which is separate from the bank’s third party placement agency, which raises external funds.
Credit Suisse and the Strategic Partners team contributed about 3 percent of commitments to the fund, which was lower than the historic 5 percent contribution because of the Dodd-Frank financial reform rules. Under Dodd-Frank, the so-called Volcker rule restricts financial institutions from investing more than 3 percent of its Tier 1 capital in private equity.