Renshaw Bay to provide calm in credit storm

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March 29, 2013 7:43 pm
Renshaw Bay to provide calm in credit storm
By David Oakley and Patrick Jenkins

When Bill Winters, the former number two at JPMorgan Chase, found himself a slick office for his new investment venture last year, there was a seedy downside. The site in an up-and-coming street in the heart of London’s West End overlooked a brothel. The view – now obscured by frosted glass – was a colourful change of vista compared with the bland City offices he overlooked at JPMorgan’s European headquarters.

There has been a parallel altered perspective in Mr Winters’ work these days. After leaving JPMorgan in 2009, when he fell out with chief executive Jamie Dimon, the US-born Anglophile quickly realised that the financial crisis would push traditional banks out of much of the credit business on which the pre-2007 boom period had been founded.

“The capital markets, particularly in Europe, are in the process of being fundamentally restructured,” Mr Winters says in a rare interview. “The cost of capital for a bank has gone up – it had got to ridiculously low levels because it was guaranteed by governments. That has now been reversed.”

Today, as head of Renshaw Bay, a private equity-cum-credit fund manager he founded a couple of years ago, his aim is to take advantage of those “dislocated credit markets”, as banks have derisked and many of their former activities have been rendered uneconomic by tougher regulation.

Mr Winters is convinced that the way European companies are financed will go through a fundamental change, with a greater role for non-banks and capital markets and a shift away from the 70-30 bias towards bank-funded corporate financing in the direction of the US’s 30-70 split.

“I think we’ll get to 50-50 in Europe,” says Mr Winters. “We’ll be a part of that. We intend to be at the leading edge.”

By stepping into the breach in three main areas – financing real estate debt, managing down banks’ old structured finance portfolios and investing in corporate credit – Mr Winters believes he can make chunky returns for the backers of Renshaw Bay.

Mr Winters’ venture is backed by two of Europe’s wealthiest family investment groups – RIT Capital Partners, Lord Rothschild’s listed investment trust, and Reinet, the Luxembourg investment vehicle of South African financier Johann Rupert, created a few years ago from the restructuring of Swiss luxury group Richemont.

Now he is about to close his first fund – a real estate financing vehicle with £120m of seed money from Renshaw Bay’s core backers, with a targeted £500m to be raised from a panel of pension funds, insurers, private banks and endowment funds by May.

“For me, this is a chance to be involved in something from the ground floor,” Mr Winters says. “This is something I wanted to do ever since I left JPMorgan. There is a big opportunity.”

Mr Winters is clearly doing something he relishes – he is his own boss, working hard but also able to spend far more time with his young family than he ever could at JPMorgan, especially in the heat of the crisis when he would work long hours and fly round the world at a moment’s notice.

The handbrake turn in Mr Winters’ career is not uncommon in the financial sector as many bankers have either been culled as part of the wave of job cuts and rationalisation in the industry or have grown disillusioned with the banking sector where there are more constraints because of regulations and capital requirements.

Some of these bankers have, like Mr Winters, changed sides and joined the so-called alternative investment industry, where there is more freedom and arguably more opportunities to make money.

However, he insists he is no snatch-and-grab profiteer. “There are credit funds that made really good returns between 2009 and 2012 by stepping into these dislocated markets. But they’re not structural players. They’re carpetbaggers. All the distressed funds, the opportunistic funds are in and out. We want to be a fixture in the capital markets.”

Bill Winters as credit fund entrepreneur is his third incarnation. In between JPMorgan and Renshaw Bay, he spent a year-and-a-half cleansing his image as an unpaid public servant on the Vickers Commission, the UK government-appointed body set up to decide on how banks could be made structurally safer.

Mr Winters is clear about his motivation. “Working on the commission was an opportunity to give something back, to be altruistic.”

He was pleasantly surprised that the vast majority of the commission’s recommendations on ringfencing and other reforms were accepted, he says. “That was satisfying. The commission has influenced the debate in Europe and the US too.”

Mr Winters now wants to exert similar influence on the reshaping of the markets in the post-financial crisis world. “When I’m 85 and sitting in a rocking job, I’ll be happy with the jobs I had at JPMorgan and I know I’ll value the 15 months I spent at the banking commission.”

It is too early to judge whether Renshaw Bay will be the third big happy memory, but Mr Winters seems determined. “If we do it right, we will start off as a niche,” he says. “But we could become something much more substantial in a decade from now.”

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