Who knew? Toxic Credit-Suisse fund soars

Up 72% in 2009.

Shares in a $5 billion pool of toxic assets distributed as 2009 bonus pay for Credit Suisse Group investment bankers returned 72% last year, people familiar with the situation said.

Known as the Partner Asset Facility, the plan was originally billed as a way for Credit Suisse bankers to “eat their own cooking.”

The pool is largely made up of commercial mortgage-backed securities and leveraged-loan products Credit Suisse sought to offload in late 2008 as it scaled back its own risk-taking. The fund assets originally included debt of a Japanese shopping center, a mining company and a U.S. supermarket chain.

When the fund was unveiled in January, 2009 Credit Suisse bankers groused about the plan, fearing the securities would register few gains. Some bankers argued that they hadn’t contributed to Credit Suisse’s 2008 net loss. A number of them had hoped for cash bonuses instead.

But Credit Suisse’s timing now appears impeccable. The fund’s 72% increase for 2009 compares with a 23.5% rise in the Standard & Poor’s 500-stock index and an 18.8% gain in the Dow Jones Industrial Average. Credit Suisse shares rose 60% over 2009.

Even the bankers who sold this stuff thought they were dealing in er, barnyard material. Only problem: they can’t withdraw their gains until 2014. Seems fair to me.

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One response to “Who knew? Toxic Credit-Suisse fund soars

  1. Sanjay Bigglesworth

    Lemme guess. The +72% is based on internal UBS models.

    I can’t believe that any structured product with a vintage of 2007 or 2008 is in the black. Unless the initial NPV was a homer valuation. But I can’t believe the bankers would do that.

    I am guessing that in 2014 when they actually liquidate the bonus fund, the total payout will be significantly less than what the internal UBS models are predicting. But that will be will be swept under the rug, of course.