Though suffering the biggest losses from the credit crunch, UBS is intending to focus on prime brokerage, taking advantage of chaos in the market for hedge fund services, reports Reuters.
UBS has been hit by more than $37 billion of losses on mortgages and other assets over the past year, prompting the bank to slash capital and cut jobs.
However, the collapse of Bear Stearns, the market’s less than enthusiastic response to Bank of America’s prime broker auction and problems at other Wall Street firms have created opportunities to expand, says Alex Ehrlich, UBS’ global head of prime services, in an interview with Reuters.
A growing crisis of confidence in Bear Stearns fueled a run on the New York bank by hedge funds, which withdrew cash balances and lead to Bear Stearns’ dramatic collapse.
Bank of America slashed capital markets jobs and put its prime broker unit up for sale in January. Yet an auction scheduled to be completed last month attracted few bids, and scared off clients worried about the bank’s commitment to the business.
Events such as these have meant that more hedge fund advisers are telling clients they should protect themselves by having more than one broker, giving UBS the chance to win more mandates as a fund’s second broker.
UBS prime brokerage, which has more than 1,000 clients worldwide, saw client balances grow by 50% last year. Since buying ABN Amro’s prime brokerage arm about five years ago, UBS says it has grown to be Europe’s leading prime broker.