To SpaceX and Beyond! CIC Bank and the Opening of Private Markets

Bank CIC (Switzerland) is part ofCredit Mutuel Group, one of the largest banksin France.With a strong regional presence in Switzerland, it caters primarily to entrepreneurs and wealthy individuals. Its focushas traditionally been on the mortgage and credit side, with lending activities being usually combined with asset management services.As Nicolas Laporte, Head Investment Products & Solutionsat Bank CIC, explains, until a couple of years agoasset management strategies proposed to clients had been quite traditional. From 2021 onward, a shift occurred with the bank starting to introduce private markets investment solutions. This shift was triggered initially by requests coming from Bank CIC's own pension fund as, at the time, its investment committee was looking for alternatives to public debt and equity. Rapidly, the solutions deployed for the pension fund were proposed to the bank's clients and prospects.“As we belong to a banking cooperative, we have a natural affinity to clients that aren’t necessarily in the 50 million US dollars or more of investable assets category. Private markets areabroad universethat is generally reserved for large companies or ultra-highnet worth individuals. We wanted to go down a notch and provide private markets investment opportunities to the broadest public possible.”These considerations led to discussions with a CIC partnerwho in turn recommendedGenTwo and its securitization platform. That, as Laporte explains, opened the door to a widerange of new ideas.“We didn’t want to go into private market funds in a traditional way, like most banks do. We wanted to make the investment process much easier for investors. Talking to GenTwo we saw that we could wrap investment opportunities into notes with relatively low minimum of entry and an ISIN. The ISIN made the purchase of notes almost as simple as buying stocks.Bankability and granularity would be beneficial for the investors, but also for the private funds as Bank CIC (Switzerland) is part ofCredit Mutuel Group, one of the largest banksin France.With a strong regional presence in Switzerland, it caters primarily to entrepreneurs and wealthy individuals. Its focushas traditionally been on the mortgage and credit side, with lending activities being usually combined with asset management services.As Nicolas Laporte, Head Investment Products & Solutionsat Bank CIC, explains, until a couple of years agoasset management strategies proposed to clients had been quite traditional. From 2021 onward, a shift occurred with the bank starting to introduce private markets investment solutions. This shift was triggered initially by requests coming from Bank CIC's own pension fund as, at the time, its investment committee was looking for alternatives to public debt and equity. Rapidly, the solutions deployed for the pension fund were proposed to the bank's clients and prospects.“As we belong to a banking cooperative, we have a natural affinity to clients that aren’t necessarily in the 50 million US dollars or more of investable assets category. Private markets areabroad universethat is generally reserved for large companies or ultra-highnet worth individuals. We wanted to go down a notch and provide private markets investment opportunities to the broadest public possible.”These considerations led to discussions with a CIC partnerwho in turn recommendedGenTwo and its securitization platform. That, as Laporte explains, opened the door to a widerange of new ideas.“We didn’t want to go into private market funds in a traditional way, like most banks do. We wanted to make the investment process much easier for investors. Talking to GenTwo we saw that we could wrap investment opportunities into notes with relatively low minimum of entry and an ISIN. The ISIN made the purchase of notes almost as simple as buying stocks.Bankability and granularity would be beneficial for the investors, but also for the private funds as it gives them a larger base of clients or potential investors.”Bank CIC (Switzerland) is part of Credit Mutuel Group, one of the largest banks in France. With a strong regional presence in Switzerland, it caters primarily to entrepreneurs and wealthy individuals. Its focus has traditionally been on the mortgage and credit side, with lending activities being usually combined with asset management services.

As Nicolas Laporte, Head Investment Products & Solutions at Bank CIC, explains, until a couple of years ago asset management strategies proposed to clients had been quite traditional. From 2021 onward, a shift occurred with the bank starting to introduce private markets investment solutions. This shift was triggered initially by requests coming from Bank CIC's own pension fund as, at the time, its investment committee was looking for alternatives to public debt and equity. Rapidly, the solutions deployed for the pension fund were proposed to the bank's clients and prospects.

“As we belong to a banking cooperative, we have a natural affinity to clients that aren’t necessarily in the 50 million US dollars or more of investable assets category. Private markets are a broad universe that is generally reserved for large companies or ultra-high net worth individuals. We wanted to go down a notch and provide private markets investment opportunities to the broadest public possible.”

These considerations led to discussions with a CIC partner who in turn recommended GenTwo and its securitization platform. That, as Laporte explains, opened the door to a wide range of new ideas.

“We didn’t want to go into private market funds in a traditional way, like most banks do. We wanted to make the investment process much easier for investors. Talking to GenTwo we saw that we could wrap investment opportunities into notes with relatively low minimum of entry and an ISIN. The ISIN made the purchase of notes almost as simple as buying stocks. Bankability and granularity would be beneficial for the investors, but also for the private funds as it gives them a larger base of clients or potential investors.”

“Talking to GenTwo we saw that we could wrap investment opportunities into notes with relatively low minimum of entry and an ISIN.”
 

Blasting off with SpaceX

To test the theory, CIC started with a project to give clients access to a fund that invested directly in Elon Musk’s SpaceX.

“The SpaceX deal is really interesting because it was kind of a test case for us,” says Mario Geniale, Head of Investments. “It is not possible for any ordinary investor to invest in SpaceX. But this particular fund had the ability to do this. Every time the fund invests in SpaceX it sets up a fund tranche and opens it up for investors. But that still doesn’t make it easy for private clients or even for a bank like us to participate.

With GenTwo’s help, CIC set up a note that invested into the fund, creating a bankable product. CIC’s clients could then purchase units of that product. The setup has a lot of advantages for all involved.

“There is a lot of work to do when investing in private markets,” explains Laporte. “Depending on the jurisdiction of the structure there can be literally hundreds of pages of documents to fill out. You have to undergo KYC/AML and provide a lot of information about yourself. Once you get all the rubber stamps from the legal departments, then you need to wire the money directly to the fund. And there are usually high minimum tickets. Banks wanting to offer such investment opportunities to their clients usually use their own omnibus account in order to do that. But this is not really scalable.”

Putting this into a bankable security via GenTwo’s platform streamlined that.

“If you can wrap that fund into a note,” says Laporte, “then you avoid a lot of that effort. GenTwo takes care of the paperwork, and you only have to do the process once. Then it is set up. All clients have to do is purchase units, which they can do over their bank account. They don't have to wire cash.” 

“The SpaceX deal is really interesting because it was kind of a test case for us.”
 

Shape of things to come

Geniale thinks this kind of setup is a harbinger of the future.

“This kind of securitization is an interesting and important way of making something that is cumbersome to subscribe to very easy to access. And, as a consequence of that, you can create liquidity, create transferability, you can have lower minimums, and so you can address a much larger market.”

Having had success with the SpaceX pilot, CIC has since structured notes worth more than 100 million Swiss francs both for internal and external use. And the bank plans to do more.

“We are having ambitious discussions internally about how to leverage what we have done so far with the SPV,” says Geniale. “We want to provide more and more solutions in the private market space to our clients. But we are also interested in sourcing transactions not only via funds but also directly, at the source, through our own client base – we are quite keen to have them provide us with interesting private investment opportunities that we would wrap into a note and make accessible to a broad range of potential investors".