Some GPs look to switch fundraisers amid Credit Suisse/UBS integration

For GPs with funds in the market, any extended fundraising delay could cause headaches as they have deadlines to meet, deals to close and employees to pay.

As UBS works on integrating various Credit Suisse platforms as part of its rescue acquisition, the bank must sort through a load of fundraising mandates led by Credit Suisse’s large private fund group.

The resolution of what happens with those fundraising mandates could prove complicated, several GP and placement agent sources told affiliate title Buyouts.

There appears to be no definitive word on what exactly will happen with those mandates, not to mention exactly which Credit Suisse executives will be moving over to UBS.

Credit Suisse has already experienced an exodus of talent from its private fund group, including one of the co-heads, Michael Murphy, who left recently to take over the investor relations function at CapVest. The group’s sole head is David Klein.

Others who left the private fund group prior to the UBS acquisition included fundraisers Jerome Wallace and Brian Williams, co-heads of Americas distribution, who left at year-end and will join William Blair later this year. Jeremy Duksin, global head of capital solutions, left last year to join Robert W Baird as head of the firm’s new secondaries advisory business.

While a Credit Suisse brand could exist after the integration, it’s not clear if that will include the private fund group. UBS has 100 bankers working on determining which Credit Suisse divisions should be wound down and which executives should be retained, the Financial Times reported earlier this month. UBS’s chairman said during an earnings call in April the integration could take three to four years.

For GPs with funds in the market, any sort of extended delay of their fundraising processes could cause headaches as they have deadlines to meet, deals to close and employees to pay. Fundraising GPs are also facing the toughest environment in years with LPs whose investment portfolios are overexposed to private equity and who have dwindling capital for new commitments from the slow exit environment.

Credit Suisse had around 30 to 35 mandates in the market at the time of the UBS acquisition, two of the sources said. The mandates include:

  • Windjammer Capital’s sixth fund, targeting $1 billion;
  • JF Lehman & Co’s sixth fund targeting $1.6 billion;
  • Lone View Capital, formed by ex-Golden Gate tech chief Rishi Chandna, targeting $900 million for its debut;
  • Vitruvian Investment Partnership V;
  • Gainline Capital’s second fund, targeting $300 million with a $400 million cap (that fund hit its target by last year);
  • InTandem Capital’s third fund, which was expected to hit the market this year.

“Nobody likes waiting for anything, everything has a shelf life,” said a GP who has been raising a fund with Credit Suisse working as placement agent. The GP said they have started informal discussions with other placement groups about potentially taking on the job.

Four executives from rival placement groups said they have been in talks with various GPs that have been working with Credit Suisse to potentially switch providers.

Spokespeople for UBS and Credit Suisse declined to comment.

Now what?

For GPs caught in the integration process, there are a few options. Some are expected to be absorbed by UBS, which has an extensive private capital advisory team of around 70 professionals. UBS’s private capital advisory group has raised funds for GPs like Veritas Capital, LightBay Capital, Kinderhook Industries, Butterfly and SK Capital.

However, sources said not every mandate will move over to UBS – some may choose to break the contract they had with Credit Suisse and find a new agent. Those GPs may have decided they didn’t want to work with UBS initially and haven’t changed their mind. Or, UBS may already be working on funds of similar strategy. Placement agents tend to try not to raise funds of similar strategies, sources said.

Also, some funds may be nearly finished fundraising, so finding a new fundraiser would not be worth the cost, sources said.

One factor in determining the disposition of some of the mandates is that GPs tend to stick with the individual fundraisers they’ve worked with at a placement agent. As long as those people are still around, the GP will likely stay, a fundraising at a rival placement shop said. “So long as their point of contact is still there, I don’t think the GP will care,” the placement agent said.

Much like private equity funds, placement contracts come with key-person protections for the client, through which the GP can break the contract. While specifics of CS’s contracts with each GP are not clear, generally a GP has the ability to fire the agent without cause given a certain notice period.

Still, the GP also likely will owe fees on investors the placement agent has brought into the fund, which are usually charged after the work is done. Even if a GP were to drop Credit Suisse and go with a new agent, it still may be paying the bank for the next few quarters for work already completed.

“Depending on how that contract is terminated, there could be a tail still owed to an agent,” said Monica Arora, partner and co-head of the private funds group at Proskauer. “It totally depends on where you are in the fundraise, how much work has been done and what your contract says.”