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Concerns see Pearson remove UBS fund

UK - Trustees of the Pearson Group pension plan will remove the UBS global optimal fund from its defined contributions investment range from January, on the back of "continuing concerns" about its investment returns.

The BGI World, ex UK, equity index fund is being introduced as an alternative investment offering to investors in the UBS fund from January 1 2008, following advice from investment consultants Watson Wyatt.

In a statement sent by Pearson to affected members, Annette Scott, group pensions manager, said: "The decision to remove the UBS Global Optimal Fund was based on the Watson Wyatt's view that it currently does not rate the fund highly in terms of future return expectations and does not consider it an appropriate fund to be included in the current Money Purchase 2003 section of the fund range."

"It was agreed that a passively managed fund that replicated a given index would be most suitable for the fund range, as there was less risk of under-performing compared to an actively managed fund."

BGI's global fund, which invests in European, Far East (including Japan), US and Canadian equities, aims to achieve a return in line with the FTSE All-World developed (ex-UK) index, and levies an annual management charge of 50 basis points, compared with  100bp on the UBS Global Optimal Fund.

Members of the Pearson money purchase 2003 plan who currently invest in the UBS fund will now see their assets transferred through the Winterthur Life-managed scheme to the BGI fund, unless otherwise specified.

This decision was made ahead of news from UBS today, announced the Swiss investment bank would have to make a further $10bn (€6.82bn) write-down on the back of the impact of sub-prime market on collateral debt obligations (CDOs) and "super senior" holdings.

The latest write-down, following earlier announced losses of $3.8bn (€bn) will made even though the firm has also managed to raise CHF13bn (€7.85bn) in new capital through two investors to its BIS tier mandatory convertible notes.

UBS' chairman Jeremy Palmer was hauled in front of UK MPs last week, along with officials from Deutsche Bank, Goldman Sachs and Citigroup, to explain their part in the recent credit crunch, which has in turn affected UK banking group Northern Rock. (See earlier IPE story: Banks tell MPs we made mistakes on credit crunch).

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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